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 2017 Edition

Taxation of Individuals
McGraw-Hill’s

Spilker • AyerS • BArrick • OutSlAy • rOBinSOn • WeAver • WOrShAm

 McGraw–Hill’s

Taxation of Individuals
 McGraw–Hill’s

Taxation of Individuals

Brian C. Spilker
Brigham Young University
Editor

Benjamin C. Ayers John A. Barrick

The University of Georgia
Edmund Outslay
Michigan State University
Connie D. Weaver
Texas A&M University
Brigham Young University
John R. Robinson
Texas A&M University
Ron G. Worsham
Brigham Young University
McGRAW-HILL’S TAXATION OF INDIVIDUALS, 2017 EDITION, EIGHTH EDITION
Published by McGraw-Hill Education, 2 Penn Plaza, New York, NY 10121. Copyright © 2017 by McGraw-Hill Education. All rights
reserved. Printed in the United States of America. Previous editions © 2016, 2015, and 2014. No part of this publication may be
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of McGraw-Hill Education, including, but not limited to, in any network or other electronic storage or transmission, or broadcast for
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Some ancillaries, including electronic and print components, may not be available to customers outside the United States.
This book is printed on acid-free paper.
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Dedications
We dedicate this book to:
My children, Braxton, Cameron, Ethan, and Lauren, and to my parents, Ray and Janet. Last but not least, to my
wife, Kim, for allowing me to take up valuable kitchen space while I was working on the project. I love you all.
Brian Spilker
My wife, Marilyn, daughters Margaret Lindley and Georgia, son Benjamin, and parents Bill and Linda.
Ben Ayers
My wife, Jill, and my children Annika, Corinne, Lina, Mitch, and Connor.
John Barrick
My family, Jane, Mark, Sarah, Chloe, Lily, and Jeff, and to Professor James E. Wheeler, my mentor and friend.
Ed Outslay
JES, Tommy, and Laura.
John Robinson
My family, Dan, Travis, Alix, and Alan.
Connie Weaver
My wife, Anne, sons Matthew and Daniel, and daughters Whitney and Hayley.
Ron Worsham
 About the Authors

Brian Spilker (PhD, University of Texas at Austin, 1993) is the Robert Call/Deloitte Pro-
fessor in the School of Accountancy at Brigham Young University. He teaches taxation
in the graduate and undergraduate programs at Brigham Young University. He received
both BS (Summa Cum Laude) and MAcc (tax emphasis) degrees from Brigham Young
University before working as a tax consultant for Arthur Young & Co. (now Ernst &
Young). After his professional work experience, Brian earned his PhD at the University
of Texas at Austin. In 1996, he was selected as one of two nationwide recipients of the
Price Waterhouse Fellowship in Tax Award. In 1998, he was a winner of the American
Taxation Association and Arthur Andersen Teaching Innovation Award for his work in
the classroom; he has also been awarded for his use of technology in the classroom at
Brigham Young University. Brian researches issues relating to tax information search
and professional tax judgment. His research has been published in journals such as The
Accounting Review, Organizational Behavior and Human Decision Processes, Journal of
the American Taxation Association, Behavioral Research in Accounting, Journal of Ac-
counting Education, Journal of Corporate Taxation, and Journal of Accountancy.

Ben Ayers (PhD, University of Texas at Austin, 1996) holds the Earl Davis Chair in Taxa-
tion and is the dean of the Terry College of Business at the University of Georgia. He
received a PhD from the University of Texas at Austin and an MTA and BS from the
University of Alabama. Prior to entering the PhD program at the University of Texas,
Ben was a tax manager at KPMG in Tampa, Florida, and a contract manager with Com-
plete Health, Inc., in Birmingham, Alabama.

Ben teaches tax planning and research courses in the undergraduate and graduate pro-
grams at the University of Georgia. He is the recipient of 11 teaching awards at the school,
college, and university levels, including the Richard B. Russell Undergraduate Teaching
Award, the highest teaching honor for University of Georgia junior faculty members. His
research interests include the effects of taxation on firm structure, mergers and acquisi-
tions, and capital markets and the effects of accounting information on security returns. He
has published articles in journals such as the Accounting Review, Journal of Finance, Jour-
nal of Accounting and Economics, Contemporary Accounting Research, Review of Account-
ing Studies, Journal of Law and Economics, Journal of the American Taxation Association,
and National Tax Journal. Ben was the 1997 recipient of the American Accounting Asso-
ciation’s Competitive Manuscript Award and the 2003 and 2008 recipient of the American
Taxation Association’s Outstanding Manuscript Award.

v
vi About the Authors

John Barrick (PhD, University of Nebraska at Lincoln, 1998) is currently an associate

professor in the Marriott School at Brigham Young University. He served as an accoun-
tant at the United States Congress Joint Committee on Taxation for the 110th and 111th
Congresses. He teaches taxation in the graduate and undergraduate programs at Brigham
Young University. He received both BS and MAcc (tax emphasis) degrees from Brigham
Young University before working as a tax consultant for Price Waterhouse (now Pricewa-
terhouseCoopers). After his professional work experience, John earned his PhD at the
University of Nebraska at Lincoln. He was the 1998 recipient of the American Account-
ing Association, Accounting, Behavior, and Organization Section’s Outstanding Disser-
tation Award. John researches issues relating to professional tax judgment and tax
information search. His research has been published in journals such as Organizational
Behavior and Human Decision Processes, Contemporary Accounting Research, and Jour-
nal of the American Taxation Association.

Ed Outslay (PhD, University of Michigan, 1981) is a professor of accounting and the

Deloitte/Michael Licata Endowed Professor of Taxation in the Department of Account-
ing and Information Systems at Michigan State University, where he has taught since
1981. He received a BA from Furman University in 1974 and an MBA and PhD from the
University of Michigan in 1977 and 1981. Ed currently teaches graduate classes in corpo-
rate taxation, multiunit enterprises, accounting for income taxes, and international taxa-
tion. In February 2003, Ed testified before the Senate Finance Committee on the Joint
Committee on Taxation’s Report on Enron Corporation. MSU has honored Ed with the
Presidential Award for Outstanding Community Service, Distinguished Faculty Award,
John D. Withrow Teacher-Scholar Award, Roland H. Salmonson Outstanding Teaching
Award, Senior Class Council Distinguished Faculty Award, MSU Teacher-Scholar
Award, and MSU’s 1st Annual Curricular Service-Learning and Civic Engagement
Award in 2008. Ed received the Ray M. Sommerfeld Outstanding Tax Educator Award in
2004 and the lifetime Service Award in 2013 from the American Taxation Association.
He has also received the ATA Outstanding Manuscript Award twice, the ATA/Deloitte
Teaching Innovations Award, and the 2004 Distinguished Achievement in Accounting
Education Award from the Michigan Association of CPAs. Ed has been recognized for
his community service by the Greater Lansing Chapter of the Association of Govern-
ment Accountants, the City of East Lansing (Crystal Award), and the East Lansing Edu-
cation Foundation. He received a National Assistant Coach of the Year Award in 2003
from AFLAC and was named an Assistant High School Baseball Coach of the Year in
2002 by the Michigan High School Baseball Coaches Association.
 About the Authors vii

John Robinson (PhD, University of Michigan, 1981) is the Patricia ‘77 and Grant E. Sims
‘77 Eminent Scholar Chair in Business. Prior to joining the faculty at Texas A&M, John
was the C. Aubrey Smith Professor of Accounting at the University of Texas at Austin,
Texas, and he taught at The University of Kansas where he was The Arthur Young Fac-
ulty Scholar. In 2009-2010 John served as the Academic Fellow in the Division of Corpo-
ration Finance at the Securities and Exchange Commission. He is the recipient of the
Henry A. Bubb Award for outstanding teaching, the Texas Blazer’s Faculty Excellence
Award, and the MPA Council Outstanding Professor Award. John also received the 2012
Outstanding Service Award from the American Taxation Association (ATA). John served
as the 2014-2015 -President (elect) of the ATA and is the ATA’s president for 2015-2016.
John conducts research in a broad variety of topics involving financial accounting, mergers
and acquisitions, and the influence of taxes on financial structures and performance. His
scholarly articles have appeared in The Accounting Review, The Journal of Accounting
and Economics, Journal of Finance, National Tax Journal, Journal of Law and Economics,
Journal of the American Taxation Association, The Journal of the American Bar Associa-
tion, and The Journal of Taxation. John’s research was honored with the 2003 and 2008
ATA Outstanding Manuscript Awards. In addition, John was the editor of The Journal
of the American Taxation Association from 2002 through 2005. Professor Robinson
­received his J.D. (Cum Laude) from The University of Michigan in 1979, and he earned a
PhD in accounting from The University of Michigan in 1981. John teaches courses on
individual and corporate taxation and advanced accounting.

Connie Weaver Connie Weaver (PhD, Arizona State University, 1997) is the KPMG Pro-
fessor of Accounting at Texas A&M University. She received a PhD from Arizona State
University, an MPA from the University of Texas at Arlington, and a BS (chemical engi-
neering) from the University of Texas at Austin. Prior to entering the PhD Program,
Connie was a tax manager at Ernst & Young in Dallas, Texas, where she became licensed
to practice as a CPA. She teaches taxation in the graduate and undergraduate programs
at Texas A&M University. She has also taught undergraduate and graduate students at
the University of Wisconsin-Madison and the University of Texas at Austin. She is the
recipient of several teaching awards including the 2006 American Taxation Association/
Deloitte Teaching Innovations, the David and Denise Baggett Teaching, and Association
of Former Students Distinguished Achievement awards recognizing innovation in teach-
ing taxation. Connie’s current research interests include the effects of tax and financial
incentives on corporate decisions and reporting. She has published articles in journals
such as the Accounting Review, Contemporary Accounting Research, Journal of the Ameri-
can Taxation Association, Accounting Horizons, Journal of Corporate Finance, and Tax
Notes. She serves on the editorial board of Contemporary Accounting Research and
­Issues in Accounting Education and was the 1998 recipient of the American Taxation
Association/Price Waterhouse Outstanding Dissertation award.

Ron Worsham (PhD, University of Florida, 1994) is an associate professor in the School
of Accountancy at Brigham Young University. He teaches taxation in the graduate, un-
dergraduate, MBA, and Executive MBA programs at Brigham Young University. He has
also taught as a visiting professor at the University of Chicago. He received both BS and
MAcc (tax emphasis) degrees from Brigham Young University before working as a tax
consultant for Arthur Young & Co. (now Ernst & Young) in Dallas, Texas. While in
Texas, he became licensed to practice as a CPA. After his professional work experience,
Ron earned his PhD at the University of Florida. He has been honored for outstanding
innovation in the classroom at Brigham Young University. Ron has published academic
research in the areas of taxpayer compliance and professional tax judgment. He has also
published legal research in a variety of areas. His work has been published in journals
such as Journal of the American Taxation Association, The Journal of International Taxa-
tion, The Tax Executive, Journal of Accountancy, and Practical Tax Strategies.
TEACHING THE CODE IN CONTEXT

The basic approach to teaching taxation hasn’t changed in decades. Today’s

student deserves a new approach. McGraw-Hill’s Taxation of Individuals
and Business Entities is a bold and innovative series that has been adopted
by over 300 schools across the country.
McGraw-Hill’s Taxation is designed to pro-
“This is the best tax book on the market. It’s
vide a unique, innovative, and engaging
very readable, student-friendly, and provides
learning experience for students studying tax-
great supplements.”
ation. The breadth of the topical coverage,
the storyline approach to presenting the mate- – Ann Esarco,
rial, the emphasis on the tax and nontax con- McHenry County College
sequences of multiple parties involved in
transactions, and the integration of financial
and tax accounting topics make this book
ideal for the modern tax curriculum.

Since the first manuscript was written in

“A lot of thought and planning went into the
2005, 400 professors have contributed 441
structure and content of the text, and a great
product was achieved. One of the most unique
book reviews, in addition to 23 focus groups
and helpful features is the common storyline and symposia. Throughout this preface, their
throughout each chapter.” comments on the book’s organization, peda-
gogy, and unique features are a testament
– Raymond J. Shaffer,
to the market-driven nature of Taxation’s
Youngstown State University
­development.

“The Spilker text, in many ways, is a more logical approach than any other tax textbook. The text
makes great use of the latest learning technologies through Connect and LearnSmart.”
– Ray Rodriguez, Southern Illinois University–Carbondale

viii
A MODERN APPROACH FOR
TODAY’S STUDENT
“This text provides a new approach to the teaching of the technical material. The style of the text
material is easier to read and understand. The examples and storyline are interesting and informa-
tive. The arrangement makes more sense in the understanding of related topics.”
– Robert Bertucelli, Long Island University–Post

Spilker’s taxation series was built around the following five core precepts:

1 Storyline Approach: Each chapter begins with a storyline that introduces a set of characters
or a business entity facing specific tax-related situations. Each chapter’s examples are related
to the storyline, providing students with opportunities to learn the code in context.

2 Conversational Writing Style: The authors took special care to write McGraw-Hill’s Taxa-
tion that fosters a friendly dialogue between the content and each individual student.
The tone of the presentation is intentionally conversational—creating the impression of
speaking with the student, as opposed to lecturing to the student.

3 Superior Organization of Related Topics:

McGraw-Hill’s Taxation takes a fresh “I believe it breaks down complex topics in a
way that’s easy to understand. Definitely easier
approach to taxation by providing two
than other tax textbooks that I’ve had experi-
alternative topic sequences. In the
ence with.”
­McGraw-Hill’s Taxation of Individuals
and Business Entities, topics are grouped – Jacob Gatlin, Athens State University
in theme chapters, including separate
chapters on home ownership, compensation, investments, and retirement savings and
deferred compensation. However, in the Essentials of Federal Taxation, topics follow a
more traditional sequence with topics presented in a life-cycle approach.

4 Real-World Focus: Students learn best when they see how concepts are applied in the real
world. For that reason, real-world examples and articles are included in “Taxes in the
Real World” boxes throughout the book. These vignettes demonstrate current issues in
taxation and show the relevance of tax issues in all areas of business.

5 Integrated Examples: The examples used

“Excellent text; love the story line approach
throughout the chapter relate directly to
and integrated examples. It’s easy to read and
the storyline presented at the beginning
understand explanations. The language of the
of each chapter, so students become famil- text is very clear and straightforward.”
iar with one set of facts and learn how to
apply those facts to different scenarios. – Sandra Owen, Indiana University–Bloomington
In addition to providing in-context
­examples, we provide “What if” scenarios within many examples to illustrate how varia-
tions in the facts might or might not change the answers.

ix
 ©Hero Images/Getty Images
®

Required=Results

McGraw-Hill Connect®
Learn Without Limits
Connect is a teaching and learning platform
that is proven to deliver better results for
students and instructors.
Connect empowers students by continually
adapting to deliver precisely what they need,
when they need it, and how they need it,
so your class time is more engaging and
effective.

Using Connect improves passing rates

by 10.8% and retention by 16.4%.
88% of instructors who use Connect
require it; instructor satisfaction increases
by 38% when Connect is required.

Analytics
Connect Insight®
Connect Insight is Connect’s new one-of-a-kind
visual analytics dashboard that provides at-a-
glance information regarding student performance,
which is immediately actionable. By presenting assignment,
assessment, and topical performance results together with
a time metric that is easily visible for aggregate or individual
results, Connect Insight gives the user the ability to take a
just-in-time approach to teaching and learning, which was
never before available. Connect Insight presents data that helps
instructors improve class performance in a way that is efficient
and effective.
Adaptive
THE FIRST AND ONLY
ADAPTIVE READING
EXPERIENCE DESIGNED
TO TRANSFORM THE
©Getty Images/iStockphoto WAY STUDENTS READ

More students earn A’s and

B’s when they use McGraw-Hill
Education Adaptive products.

SmartBook®
Proven to help students improve grades and
study more efficiently, SmartBook contains the
same content within the print book, but actively
tailors that content to the needs of the individual.
SmartBook’s adaptive technology provides
precise, personalized instruction on what the
student should do next, guiding the student to
master and remember key concepts, targeting
gaps in knowledge and offering customized
feedback, and driving the student toward
comprehension and retention of the subject
matter. Available on smartphones and tablets,
SmartBook puts learning at the student’s
fingertips—anywhere, anytime.

Over 4 billion questions have been

answered, making McGraw-Hill
Education products more intelligent,
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www.learnsmartadvantage.com
ONLINE ASSIGNMENTS
Connect helps students learn more effi-
ciently by providing feedback and prac-
tice material when they need it, where
they need it. Connect grades homework
automatically and gives immediate feed-
back on any questions students may
have missed. The extensive assignable,
gradable end-of-chapter content includes
a general journal application that looks
and feels more like what you would find
in a general ledger software package.
Also, select questions have been rede-
signed to test students’ knowledge more
fully. They now include tables for students to work through rather than requiring that all calcu-
lations be done offline.

End-of-chapter questions in Connect include:

• Discussion Questions
• Problems
• Comprehensive Problems (Available in the Tax Form Simulation!)

NEW! Tax Form Simulation

New auto-graded Tax Form Simulation provides a much-improved student experience when
solving the tax-form based problems. The tax form simulation allows students to apply tax con-
cepts by completing the actual tax forms online with automatic feedback and grading for both
students and instructors.

xii
NEW! Guided Examples
The Guided Examples in Connect provide a narrated, animated, step-by-step walk-through of
select problems similar to those assigned. These short presentations can be turned on or off by
instructors and provide reinforcement when students need it most.

McGraw-Hill Customer Experience Group Contact Information

At McGraw-Hill, we understand that getting the most from new technology can be challenging.
That’s why our services don’t stop after you purchase our products. You can contact our Prod-
uct Specialists 24 hours a day to get product training online. Or you can search the knowledge
bank of Frequently Asked Questions on our support website. For Customer Support, call
800-331-5094, or visit www.mhhe.com/support. One of our Technical Support Analysts will be
able to assist you in a timely fashion.
TaxACT®
McGraw-Hill’s Taxation can be packaged with tax software from TaxACT, one
of the leading preparation software companies in the market today. The 2016 edi-
tion includes availability of both Individuals and Business Entities software, including the 1040
forms and TaxACT Preparer’s Business 3-Pack (with Forms 1065, 1120, and 1120S).

xiii
A STORYLINE APPROACH THAT WILL
RESONATE WITH STUDENTS
Each chapter begins with a storyline
that introduces a set of characters fac-
Storyline Summary
Taxpayers: Courtney Wilson, age 40,
ing specific tax-related situations. This
Courtney’s mother Dorothy “Gram”
Weiss, age 70 revolutionary approach to teaching tax
Family
description:
Courtney is divorced with a son, Deron,
age 10, and a daughter, Ellen, age 20.
Gram is currently residing with Courtney.
emphasizes real people facing real tax
Location: Kansas City, Missouri dilemmas. Students learn to apply prac-
tical tax information to specific busi-
© Image Source Employment Courtney works as an architect for EWD.
status: Gram is retired.

C
Filing status: Courtney is head of household. Gram is

ness and personal situations. The

ourtney has already determined
her taxable income. Now she’s
Current
working on computing her tax
liability. She knows she owes a significant
situation:
amount of regular income tax on her
single.
Courtney and Gram have computed their
taxable income. Now they are trying to
determine their tax liability, tax refund
or additional taxes due, and whether
characters are brought further to life.
they owe any payment-related penalties.

employment and business activities.

However, she’s not sure how to compute the tax
on the qualified dividends she received from
General Electric. Courtney is worried that she
may be subject to the alternative minimum tax
this year because she’s heard that an increasing
number of taxpayers in her income range must
pay the tax. Finally, Courtney knows she owes
some self-employment taxes on her business income.
Courtney would like to determine whether she is
eligible to claim any tax credits such as the child
tax credit for her two children and education credits
because she paid for a portion of her daughter
Ellen’s tuition at the University of Missouri–Kansas
City this year. Courtney is hoping that she has
Examples
Examples are the cornerstone of
any textbook covering taxation.
For this reason, McGraw-Hill’s
paid enough in taxes during the year to avoid
underpayment penalties. She’s planning on filing
her tax return and paying her taxes on time.
Gram’s tax situation is much more straight-
forward. She needs to determine the regular in-
come tax on her taxable income. Her income is so
low she knows she need not worry about the alter- “The text provides very useful tools that
native minimum tax, and she believes she doesn’t
owe any self-employment tax. Gram didn’t prepay
students can read and understand, mak-
any taxes this year, so she is concerned that she
might be required to pay an underpayment penalty.
ing it easier to break the myth that ‘tax is
She also expects to file her tax return and pay her hard.’”
taxes by the looming due date.
to be continued . . .
– Daniel Hoops, Walsh College
“I absolutely love this textbook. This
textbook makes my job of teaching so
much easier.”
8-1

Taxation authors took special 2-4 CHAPTER 2

– Chuck Pier, Angelo State University
Tax Compliance, the IRS, and Tax Authorities

care to create clear and helpful

spi4866x_ch08_000-055.indd 1
The statute of limitations for IRS assessment can be extended in certain circum-
1/22/16 2:09 PM

stances. For example, a six-year statute of limitations applies to IRS assessments if

examples that relate to the story­ the taxpayer omits items of gross income that exceed 25 percent of the gross income
reported on the tax return. For fraudulent returns, or if the taxpayer fails to file a tax
line of the chapter. Students return, the news is understandably worse. The statute of limitations remains open
learn to refer to the facts pre- indefinitely in these cases.

sented in the storyline and apply Example 2-1

them to other scenarios—in this Bill and Mercedes file their 2012 federal tax return on September 6, 2013, after receiving an auto-
matic extension to file their return by October 16, 2013 (October 15 was a Sunday). In 2016, the IRS

way, they build a greater base of selects their 2012 tax return for audit. When does the statute of limitations end for Bill and
Mercedes’s 2012 tax return?

knowledge through application. Answer: Assuming the six-year and “unlimited” statute of limitation rules do not apply, the statute
of limitations ends on September 6, 2016 (three years after the later of the actual filing date and the

Many examples also include original due date).

What if: When would the statute of limitations end for Bill and Mercedes for their 2012 tax return

“What if ?” scenarios that add if the couple filed the return on March 22, 2013 (before the original due date of April 15, 2013)?
Answer: In this scenario the statute of limitations would end on April 15, 2016, because the later
more complexity to the example of the actual filing date and the original due date is April 15, 2013.

or explore related tax concepts. Taxpayers should prepare for the possibility of an audit by retaining all support-
ing documents (receipts, cancelled checks, etc.) for a tax return until the statute of
limitations expires. After the statute of limitations expires, taxpayers can discard the
majority of supporting documents but should still keep a copy of the tax return it-
“The case study approach is ex- self, as well as any documents that may have ongoing significance, such as those es-
tablishing the taxpayer’s basis or original investment in existing assets like personal
cellent as you follow the taxpay- residences and long-term investments.

ers through the chapters.” LO 2-2 IRS AUDIT SELECTION

Why me? This is a recurring question in life and definitely a common taxpayer ques-
– Irwin Uhr, Hunter College tion after receiving an IRS audit notice. The answer, in general, is that a taxpayer’s
return is selected for audit because the IRS has data suggesting the taxpayer’s tax
return has a high probability of a significant understated tax liability. Budget con-
straints limit the IRS’s ability to audit a majority or even a large minority of tax re-
turns. Currently, fewer than 2 percent of all tax returns are audited. Thus, the IRS
xiv must be strategic in selecting returns for audit in an effort to promote the highest
level of voluntary taxpayer compliance and increase tax revenues.
Specifically, how does the IRS select tax returns for audit? The IRS uses a num-
ber of computer programs and outside data sources (newspapers, financial statement
disclosures, informants, and other public and private sources) to identify tax returns
that may have an understated tax liability. Common computer initiatives include the
THE PEDAGOGY YOUR STUDENTS NEED
TO PUT THE CODE IN CONTEXT
Taxes in the Real World
Taxes in the Real World are short
throughout the book to demonstrate
$80,000 of taxable income
(3) Taxable income before additional $160,000.00
world use of tax concepts. Current articles on$ tax
(4) Tax on $160,000 taxable income
issues, real-world application
Marginal tax
tax rules, and short vignettes on popular news
Note that Bill and Mercedes’s marginal tax rate on the $80,000 increase in taxable income rests
about tax are some of thebetween
issues
in the Real World boxes. ($231,450
$231,450 = $8,550) taxed at 33 percent.
“The Spilker text makes tax easy for students to un-
derstand. It integrates great real-world examples so
students can see how topics will be applied in
practice. The integration of the tax form and exhibits
of the tax forms in the text are outstanding.”
– Kristen Bigbee,
The Key Facts
Marginal Key Facts
provide quick synop-
ses of the critical
pieces of information
presented through-
out each chapter.
Exhibits
Today’s students are visual learners,
and McGraw-Hill’s Taxation delivers
The marginal tax rate is particularly useful in tax planning because it represents
by making appropriatetheuse oftaxation
rate of
diagrams, and tabular demonstrations
deductions). In Chapter 3, we discuss basic tax planning strategies that use the mar-
ginal tax rate.
of key material. The average tax rate represents a taxpayer’s average level of taxation on each
“A good textbook that uses
amples throughout the chapters
give a student an understanding of
the tax theory and how it applies to
the taxpayers.”
– Jennifer Wright,
Drexel University
spi4866x_ch01_000-029.indd 7
CHAPTER 1 An Introduction to Tax 1-3
CHAPTER 1 An Introduction to Tax 1-7
TAXES IN THE REAL WORLD Republicans vs. Democrats
We often boil down the tax policy of our major Republicans also seek to limit income taxes for
Description
boxes used Amount Explanation political parties into its simplest form: Demo-
crats raise taxes to fund social programs, and
individuals so that people can hold on to more
disposable income, which they can then spend,
the real-
Example 1-3. Republicans lower taxes to benefit big busi-
nesses and the wealthy. Both ideas simplify the
Political Ideology: Democrat
save, or invest.
policy of each party, yet both ideas are essen-
The tax policy for the Democratic Party calls for
31,785.50 Example 1-3. tially true.
raising certain taxes to provide money for gov-
Whether you agree with more government
ofratechapter-specific
on additional 28.53%
¢Tax
¢Taxable income
= [ (2) − (4) ]/[ (1) − (3) ]
ernment spending, which in turn generates
spending or tax breaks for corporations, each
business. The party platform asserts that gov-
party’s agenda will affect your taxes.
ernment spending provides “good jobs and will
Political Ideology: Republican help the economy today.”
Many Democrats are adherents to Keynes-
covered
the 28 percent and 33 inpercent
Taxes “We believe government should tax only to raise
bracket rates because a portion of the additional income
money for its essential functions.” The Republi-
ian economics, or aggregate demand, which
holds that when the government funds pro-
cans state their case plainly on the Republican
− $160,000 = $71,450) is taxed at 28 percent with the remaining income ($240,000 −
National Convention website. That is, Republi-
cans believe government should spend money
grams, those programs pump new money into
the economy. Keynesians believe that prices
tend to stay relatively stable and therefore any
only to enforce contracts, maintain basic infra-
structure and national security, and protect citi- kind of spending, whether by consumers or the
government, will grow the economy.
zens against criminals.
Like the Republicans, Democrats believe
The literature of the House Republican Con-
the government should subsidize vital services THE KEY FACTS
ference goes on to illuminate the role of the
that keep cities, states, and the country run- Example 1-5
government and how tax policies affect individ- What Qualifies
uals: “The money the government spends does ning: infrastructure such as road and bridge as a Tax?
Assume now that, instead of receiving a book advance,not Bill andtoMercedes
belong start
the government; the maintenance and repairs for schools. Demo-
a newtobusiness
it belongs
• The general purpose of
crats also call for tax cuts for the middle class.
taxpayers who earned it. Republicans believe taxes is to fund govern-
that loses $60,000 this year (it results in $60,000 of additional tax deductions). What would be their
Americans deserve to keep more of their own
But who benefits most under each platform?
ment agencies.
marginal tax rate for these deductions? money to save and invest for the future, and
The conventional wisdom is that corporations
low tax policies help drive a strong and healthy and the wealthy will benefit more with a Repub-
• Unlike fines or penalties,
taxes are not meant to
Answer: 25.41 percent, computed as follows:
economy.”
lican tax policy, while small businesses and
Tax relief is the Republican route to growing middle-class households will benefit from a
punish or prevent illegal
behavior; but “sin taxes”
Description Amount Explanation
the economy. A Republican government would
Democratic tax policy. are meant to discourage
Texas
(1) Taxable Tech
income University
with additional $100,000.00
reduce taxes for businesses to allow busi-
$160,000 taxable income stated in
nesses to grow and thus hire more employees.
Source: http://www.investopedia.com/articles/
economics/09/us-parties-republican-democrat-taxes.asp
some behaviors.
• The three criteria neces-
$60,000 of tax deductions Example 1-3 less $60,000. sary to be a tax are that
the payment is
(2) Tax on $100,000 taxable income $ 16,542.50
Using the rate schedule in Example 1-3, • required
In summary, taxes affect many aspects of personal, business, and political deci-
$16,542.50 = $10,367.50 + 25% × • imposed by a
sions. Developing a solid understanding of taxation should allow you to make in-
formed ($100,000
decisions − in
$75,300).
these areas. Thus, Margaret can take comfort that her semester
THE KEY FACTS
government
• and not tied directly to
$160,000.00 will likely prove useful to her personally. Who knows? Depending on her interest in
(3) Taxable income before additional Example 1-3. the benefit received by
business, investment, retirement planning, and the like, she Different may ultimately the taxpayer.
$60,000 of tax deductions Ways decide
to to
pursue a career in taxation.
(4) Tax on $160,000 taxable income $ 31,785.50 Example 1-3.
Measure Tax Rates
• Marginal tax rate
Marginal tax rate on additional 25.41%WHAT QUALIFIES
¢Tax
¢Taxable income
= [AS (2) −A (4)TAX?
]/[ (1) − (3) ] • The tax that applies to LO 1-2
next increment of in-
$60,000 of tax deductions “Taxes are the price we pay for a civilized society.”—Oliver Wendell
Taxes have been described in many terms: some positive, some negative, some
Holmes Jr.
come or deduction.
Bill and Mercedes’s marginal tax rate on $60,000 ofprove
printable, some not. Let’s go directly to a formal definition
additional
usefuldeductions
in identifying (25.41 percent)
alternative differs
taxes
• =of a tax,¢Tax
which should
taxincome
¢Taxable
and discussing alternative systems.
from their marginal tax rate on $80,000 of additional taxable
narios because the relatively large increase in deductions
A tax
efit causes
income
or service
(28.53 required
is a payment
received
some
percent)byinathese
fromincome
of their the government.
to be taxed
sce- that is unrelated
government to any specific ben-
• Useful in tax planning.
The general purpose of a tax is to fund
the operations • Average
raise revenue).2-7Taxes tax from
rate fines and
in income of the government (to income differ
CHAPTER 2 Tax Compliance, the IRS, and Tax Authorities
in a lower tax rate bracket and the relatively large increase caused some of their
penalties in that taxes are not intended to punish or prevent • Aillegal
taxpayer’s averageNone-
behavior.
to be taxed in a higher tax rate bracket.
EXHIBIT
small changes in income and deductions.
Taxpayers often will by
2-2 IRS Appeals/Litigation
theless, face the same
allowing
Process marginal
deductions taxincome,
from rates for our federal taxlevel of taxation
system on each
does encourage
dollar of taxable income.
1a. Agree with proposed IRS Exam 1b. Disagree with
adjustment proposed adjustment
Total tax
• =
Pay Taxes Due 30-Day Letter
Total income
• Useful in budgeting tax
charts,
or savings that would apply to additional taxable income (or tax
expense.
• Effective tax rate
spi4866x_ch01_000-029.indd 3 3a. Agree with proposed
adjustment
2a. Request appeals
2b. No • A taxpayer’s average
Appeals Conference taxpayer
3b. Disagree with proposed adjustment
response rate of taxation on each
dollar of total income
File Suit in U.S. District
dollar of taxable income. Specifically,
Court or U.S. Court of
Federal Claims
5. IRS denies
File Claim for
Refund with the IRS
90-Day Letter (taxable and nontaxable
refund claim 4b. Pay tax
income).
Total Tax Total tax
• =
Eq. 1-3 Average Tax Rate = Total income
Taxable Income 4a. Do not pay tax;
Petition Tax Court
• Useful in comparing the
Thegreat
averageex-
tax rate is often used in budgeting tax expense as a portion of income
Tax Court
relative tax burdens of
taxpayers.
(what percentto of taxable income earned is paid in tax).
IRS Exam: © Royalty-Free/Corbis, Supreme Court: © McGraw-Hill Education/Jill Braaten, photographer, File Claim: © Michael A.
Keller/Corbis
Federal Claims to interpret and rule differently on the same basic tax issue. Given a
choice of courts, the taxpayer should prefer the court most likely to rule favorably on
“Spilker’s use of examples immediately following the
his or her particular issues. The courts also differ in other ways. For example, the U.S.
District Court is the only court that provides for a jury trial; the U.S. Tax Court is the
only court that allows tax cases to be heard before the taxpayer pays the disputed liabil-
concept is a great way to reinforce the concepts.”
ity and the only court with a small claims division (hearing claims involving disputed
liabilities of $50,000 or less); the U.S. Tax Court judges are tax experts, whereas the
U.S. District Court and U.S. Court of Federal Claims judges are generalists. The tax-
payer should consider each of these factors in choosing a trial court. For example, if
– Karen Wisniewski, County College of Morris
the taxpayer feels very confident in her tax return position but does not have sufficient
funds to pay the disputed liability, she will prefer the U.S. Tax Court. If, instead, the
2/8/16 7:02 AM
taxpayer is litigating a tax return position that is low on technical merit but high on
emotional appeal, a jury trial in the local U.S. District Court may be the best option.
What happens after the taxpayer’s case is decided in a trial court? The process may
not be quite finished. After the trial court’s verdict, the losing party has the right to
request one of the 13 U.S. Circuit Courts of Appeals to hear the case. Exhibit 2-3 de-
picts the specific appellant courts for each lower-level court. Both the U.S. Tax Court
and local U.S. District Court cases are appealed to the specific U.S. Circuit Court of
Appeals based on the taxpayer’s residence.9 Cases litigated in Alabama, Florida, and
9
Decisions rendered by the U.S. Tax Court Small Claims Division cannot be appealed by the taxpayer
or the IRS.
xv
spi4866x_ch02_000-035.indd 7 2/23/16 5:30 PM
 Mercedes have a good likelihood of a favorable resolution at the appeals conference.
In this chapter we discussed several of the fundamentals of tax practice and pro-
cedure: taxpayer filing requirements, the statute of limitations, the IRS audit process,
the primary tax authorities, tax research, tax professional standards, and taxpayer
and tax practitioner penalties. For the tax accountant, these fundamentals form the
basis for much of her work. Likewise, tax research forms the basis of much of a tax
professional’s compliance and planning services. Even for the accountant who
doesn’t specialize in tax accounting, gaining a basic understanding of tax practice

PRACTICE MAKES PERFECT WITH A …

and procedure is important, as assisting clients with the IRS audit process is a valued
service that accountants provide, and clients expect all accountants to understand
basic tax procedure issues and how to research basic tax issues.

Summary
LO 2-1
2-30 CHAPTER 2
Tax Compliance, the IRS, and Tax Authorities
LO 2-2
KEY TERMS
30-day letter (2-6)
90-day letter (2-6)
acquiescence (2-17)
action on decision (2-17)
annotated tax service (2-18)
Circular 230 (2-24)
Summary
Identify the filing requirements for income tax returns and the statute of limitations for A unique feature of McGraw-Hill’s
assessment.
● All corporations must file a tax return annually regardless of their taxable income.
Taxation is the end-of-chapter
Estates and trusts are required to file annual income tax returns if their gross income
exceeds $600. The filing requirements for individual taxpayers depend on the taxpayer’s summary organized around learn-
●
filing status, age, and gross income.
Individual and C corporation tax returns (except for C corporations with a June 30 year-
ing objectives. Each objective has a
end) are due on the fifteenth day of the fourth month following year-end. For C corpora-
tions with a June 30 year-end, partnerships and S corporations, tax returns must be filed brief, bullet-point summary that
by the fifteenth day of the third month following the entity’s fiscal year-end. Any taxpayer
unable to file a tax return by the original due date can request an extension to file. covers the major topics and con-
● For both amended tax returns filed by a taxpayer and proposed tax assessments by the
IRS, the statute of limitations generally ends three years from the later of (1) the date cepts for that chapter, including
chapter
Tax Compliance,
2
the tax return was actually filed or (2) the tax return’s original due date.
references to critical exhibits and
the IRS, and Tax
Outline the IRS audit process, how returns are selected, the different types of audits, and
what happens after the audit.
examples.
●
Authorities
The IRS uses a number of computer programs and outside data sources to identify tax
returns that may have an understated tax liability. Common computer initiatives include
the DIF (Discriminant Function) system, document perfection program, and information
information
matching program. matching program (2-4) Statements on Standards for Tax
All end-of-chapter
● The three
Internal material is tied to learning objectives:
types ofRevenue
IRS audits Code
consistof 1986 (2-11) office, andServices
of correspondence, (SSTS) (2-23)
field examinations.
After the audit, the IRS will send the taxpayer a 30-day letter, which provides the taxpayer
●
interpretative regulations (2-16) statute of
the opportunity to pay the proposed assessment or request an appeals conference.
limitations (2-3)
legislative
If an agreement regulations
is not (2-16)
reached at appeals or the taxpayer doessubstantial authority (2-24)
not pay the proposed
Learning Objectives
nonacquiescence (2-17) tax treaties (2-14) “You can tell the authors of this
technical advice memorandum (2-16)
office examination (2-6) textbook are still in the classroom
Upon completing this chapter, you should be able to:

citator (2-21) LO 2-1 primary

Identify the authority (2-9) temporary
of limitationsregulations (2-15)
topical tax service (2-19) and responsible for the day-to-day
filing requirements for income tax returns and the statute
for assessment.
civil penalties (2-26) private letter rulings (2-16)
correspondence examination (2-5)
LO 2-2 Outline the IRS audit process, how returns are selected, the different types of audits,
procedural
and what happens regulations
after the audit. (2-16)
U.S. Circuit Courts of Appeal education
(2-7) of accounting students.
Examples are representative of the
spi4866x_ch02_000-035.indd 28 1/19/16 11:23 AM
criminal penalties (2-26) LO 2-3 proposed regulations
Evaluate the relative weights of the(2-15)
various tax law sources.
U.S. Constitution (2-11)
U.S. Court of Federal Claims (2-6)
determination letters (2-16) LO 2-4 question
Describe theof fact process
legislative (2-19) as it pertains to taxation.
U.S. District Court (2-6)
end-of-chapter problems, and the
DIF (Discriminant Function) LO 2-5 question
Perform the of
basiclaw
steps (2-19)
U.S. Supreme Court (2-8) end-of-chapter summary is an ex-
in tax research and evaluate various tax law sources when
system (2-4) faced with ambiguous statutes.
regulations (2-15)
document perfection program (2-4) LO 2-6 Describe tax professional responsibilities in providing tax advice.
revenue procedures (2-16) U.S. Tax Court (2-6) cellent study tool.”
field examination (2-6) LO 2-7 Identify taxpayer and tax professional penalties.
revenue rulings (2-16) writ of certiorari (2-8)
final regulations (2-15) secondary authorities (2-9) – Debra Petrizzo, Franklin University
Golsen rule (2-15) stare decisis (2-15)

Discussion
DISCUSSION QUESTIONS Questions
All applicable Discussion Questions are available with Connect ®. Discussion questions,
LO 2-1 1. Name three factors that determine whether a taxpayer is required to file a tax
spi4866x_ch02_000-035.indd 2 1/19/16 11:23 AM
now available in Con-
return. nect, are provided for
LO 2-1 2. Benita is concerned that she will not be able to complete her tax return by
April 15. Can she request an extension to file her return? By what date must each of the major
she do so? Assuming she requests an extension, what is the latest date that she concepts in each
could file her return this year without penalty?
chapter, providing
LO 2-1 3. Agua Linda Inc. is a calendar-year corporation. What is the original due date
for the corporate tax return? What happens if the original due date falls on a students with an op-
Saturday? portunity to review
LO 2-2 4. Approximately what percentage of tax returns does the IRS audit? What are key parts of the
the implications of this number for the IRS’s strategy in selecting returns for
“This is a very readable text. Students will understand it on their
audit? chapter and answer
own,
LO 2-2 5. Explain the difference between the DIF system and the National Research
generally, freeing more class time for application, practice, evocative questions
Program. How do they relate to each other?
and student
LO 2-2
questions.”
6. Describe the differences between the three types of audits in terms of their
about what they have
scope and taxpayer type. learned.
LO 2-2
– Valrie Chambers,
7. Simon just received a 30-day letter from the IRS indicating a proposed assessment.
Does he have to pay theTexas A&M
additional University–Corpus
tax? What are his options?Christi
LO 2-2 8. Compare and contrast the three trial-level courts.
LO 2-3 9. Compare and contrast the three types of tax law sources and give examples of
each.
LO 2-3 10. The U.S. Constitution is the highest tax authority but provides very little in the
way of tax laws. What are the next highest tax authorities after the U.S.
Constitution?
xviLO 2-3 11. Jackie has just opened her copy of the Code for the first time. She looks at the
table of contents and wonders why it is organized the way it is. She questions
whether it makes sense to try and understand the Code’s organization. What
 spi34872_ch02_000-035.indd Page 2-34 20/10/14 4:06 PM f-500 /202/MH02357/spi34872_disk1of1/1259334872/spi34872_pagefiles
ployment taxes) to employees, $45,000 of supplies, and $18,000 in rent and
other administrative expenses.
2-32 CHAPTER 2 Tax Compliance, the IRS, and
b) As a salesperson, Tax Authorities
Alyssa incurred $2,000 in travel expenses related to her em-
ployment that were not reimbursed by her employer.
LO 2-6 37.
c) The Levi is recommending
Johnsons own a piecea of taxinvestment
return position to hisThey
real estate. client. paidWhat
$500standard
of real must
2-34 CHAPTER 2 he IRS,
Tax Compliance,property
the meet and toTax
taxes satisfy
on the hisproperty
Authorities professionaland they standards?
incurredWhat $200 of is the sourceinoftravel
expenses this profes-
sional
costs to standard?
see the property and to evaluate other similar potential investment
LO 2-3 LO63. 2-6 For38. each What
properties.
of the is Circular
following230? citations, identify the type of authority (statutory,
LO 2-7 administrative,
39.
d) The What areorthe
Johnsons judicial)
basic
own and explain
differences
a rental the
home.between
They citation.
civil and
incurred criminal
$8,500 tax penalties?
of expenses associ-

…WIDE VARIETY OF ASSIGNMENT MATERIAL

LO 2-7 a) IRC40.atedSec.with
What arethe
280A(c)(5) someproperty.
of the most common civil penalties imposed on taxpayers?
LO 2-7 b) Rev.
e) The Proc. 2004-34,
Johnsons’ home2004-1 was C.B.
only 911
five miles from
41. What are the taxpayer’s standards to avoid the substantial understatement the Staples store where Alyssa of
worked
c) Lakewood in January and
Associates,
tax penalty? RIAFebruary.
TC Memo The ST store was 60 miles from their home,
95-3566
LO 2-7 d) TAM42.soWhatthe Johnsons
200427004
are the tax decided to move to
practitioner’s make thetocommute
standards avoid a penaltyeasier forfor Alyssa.
recommending
The Johnsons’ new home was only ten miles from the ST store. However, it
e) U.S. av.tax return
Muncy, position?
2008-2 USTC par. 50,449 (E.D., AR, 2008)
was 50 miles from their former residence. The Johnsons paid a moving com-

Problems Problems are designed to 64. Justinepany

LO 2-4 would $2,000 move their
like to clarify possessions to the
her understanding of anew code location.
section They recentlyalsoenacted
drove
the 50 miles
by Congress. Whattotax their
lawnew residence.
sources They stopped
are available to assist along the way for lunch
Justine?
PROBLEMS
and spent $60 eating at Denny’s. None of the moving expenses were reim-
test the comprehension of more LO 2-5 65. Aldina has identified conflicting authorities that address her research question.
How
bursed
Allshould
applicable by ST. problems
she evaluate areauthorities
these available with to make Connect ®
.
a conclusion?
f ) Jeremy paid $4,500 for health insurance coverage for himself (not through an
complex topics. Each problem at LO 2-5 LO66. 2-1 Georgette
question. hear
Jeremy
has identified
43.exchange).
Ahmed
Whatthat
does
Alyssa
must
is not
notwas ahave
sherequest
heeligible
can
1983
dofor tothe
courtbycase
enough
covered
determine
anplan
cash
health
extension
until
that
onplans
if next
the
appears
hand
tocase
file
year.
to answer
to pay
provided
stilltax
his
hisbytaxes.
represents
herher
return. Does
research
He was excited
employer,
“current”
but
this solve his
to

the end of the chapter is tied to LO 2-5 LO67.

law? problem? What are the ramifications if he doesn’t pay his tax liability by April 15?
2-1 Sandy
g) Jeremy paid $2,500 in self-employment taxes ($1,250 represents the employer
has
44.portion
Moltodetermined
Stancha
of that her research
Corporation
the self-employment had question
taxes).zero earningsdependsthis upon fiscaltheyear;
interpretation
in fact, they lost
one of that chapter’s learning ob- LO 2-1
of the phrase
is
money.
h) Jeremy
this?
45.marriage.
“not
paidMust compensated
$5,000theyinfile a tax
alimony
by return?
insurance.” What type of research question
and $3,000 in child support from his prior
The estate of Monique Chablis earned $450 of income this year. Is the estate
jectives, with multiple problems LO 2-5 68. J. C.i) has
LO 2-1 and46.
required
beenpaid
Alyssa
believes
Jamarcus,
versity. the
to$3,100
Theincome
file anofincome
a professional
a full-time
Johnsons
gambler
tuition
is tax-free.
student,
would
tax
and return?
for
like earned
many
fees
to deduct
years. night
to attend
$2,500
as much
He loves
this ofyear
classesthisatline
thisfrom
of work
a local
a summer
expenditure
uni-
as job. He
for critical topics. research a) Usepossible
correct.
an
hadavailable
this Is the
year.
othertax
norather
answer
His
research
income
than
to
employer
claimthisaservice
this
year
credit.
question
withheld
j) The Johnsons donated $2,000 to their favorite charity.
to determine
and will have zero
found
$300 ofin the
federal
whether federal
Internal
income
J. C.’s
Revenue
tax
thinking
income
fromCode?
his
is
tax liability
summer
If not, pay.what type of authority
Is Jamarcus required answersto file a this question?
tax return? Should Jamarcus file a tax return?

Tax Forms Problems Tax forms prob- tax forms

LO 2-1 70.

69. Katie
Shauna
b) Write
47.
line gambler.
Coleman
a memo
Shane
Design (SD). When
is single.
hascommunicating
never
Shauna
filed aShe
does the wanted
works
taxthe
statute
asdespite
results
return anofarchitectural
to determine
of
your
limitations
research.
earning
her taxable
expire
designer for
excessive
income
sums Stream-
of money as a
for this
for the years inyear.
which
LO 2-5 Sherecently
correctly won a ceramic
calculated her dalmatian
AGI. valued
However, at $800
she wasn’ton surea television
how to compute game the
lems are a set of requirements in- research LO 2-1 on 48.
show.restShe
the
Shane
of her
has
questions not
taxablewhether
filed
income.this
a tax return?
Sheprize
providedis taxable since it was
the following
Latoya filed her tax return on February 10 this year. When will the statute of
show.
that you could use it to determine her taxable income.
a “gift” she
information withwon
hopes

cluded in the end-of-chapter material a) Use an

49.
LO 2-1 b) Write
limitations
a) Shauna
availableexpire
Using
a letter
paid
thetofacts
tax research
$4,675
Katie from
for thisservice
forthemedical
communicating
tax return?
previous
to answer Katie’s question.
expensesproblem,
the
and Blake,would
resultshow
Shauna’s
of your research. your boyfriend,
answer change if
drove Shauna (in her car) her aincome
total ofby115 40 miles so that shewould
couldyour receive care change
of the 2017 edition. These problems LO 2-5 70. Pierre for
Latoya
a
recentlybroken
understated
ankle
received ashetax sustained
penalty in
for a biking
failing
if Latoya intentionally failed to report as taxable income any
percent?
toaccident.
file a
How
tax return. Hecash
answer
was payments she
upset toreceived
b) Shaunareceive paidthe
from apenalty,
total of but
her clients?$3,400he was comforted
in health insurance by the thoughtduring
premiums that hethe willyear
require students to complete a tax research LO 2-2 get 50. a tax
(not
a) Usesides
deduction
Paula
an
through
couldan
the health
forexchange).
paying the penalty.
not reach an SD
taxinsurance
did not reimburse
agreement
premiums
with the IRS
and the medical
anyat ofherthisappeals
expenses
expense.conference
Be-
for her broken
and
hasavailable
just received research
a 90-dayservice letter.to If determine
she wants iftoPierre litigate is the
correct.
issue but does not
form (or part of a tax form), providing students with valuable experience and practice with b) Write ankle,
a Shauna
memo had Lasik eyethe
communicating surgery
results lastof year
your and she paid $3,000 for the
research.
have sufficient cash to pay the proposed deficiency, what is her best court choice?
surgery (she received no insurance reimbursement). She also incurred $450
LO 2-5 LO71. 2-2 Paris51.was
ofInother
choosing
happy a trial-level
to provide court,the how
a contribution year.toshould
her frienda court’s
Nicole’s previouscampaignrulings influence
­filling out these forms. These requirements—and their relevant forms—are also included in for mayor,
medical
the especially
choice? How
expenses
aftershould
for
she learned
circuitthat court charitable contributions
rulings influence are tax choice of
the taxpayer’s
research deductible. a trial-level court?
Connect. Each tax forms problem includes an icon to differentiate it from regular problems. LO 2-2 a) Use52. an available
Sophia recentlytax service
won a tax to determine
case litigated whetherin theParis7th can deduct
Circuit. Shethis
recently heard
contribution.
that the Supreme Court denied the writ of certiorari. Should she be happy or
b) Writenot, and why?
a memo communicating the results of your research.
Research Problems Research LO 2-5 LO72. 2-2 Matt 53.and Campbell’s
Lori recently tax return was audited
were divorced. becausegrief
Although she failed
stricken, to report
Matt was interest
at she earned
on her comforted
least partially tax return.by What IRS audit
his monthly selection
receipt methodalimony.
of $10,000 identified Heherwastax return?
problems are special prob- 54. Yong’s
research LO 2-2 particularly tax return
excited to learn wasfromaudited because
his friend, he calculated
Denzel, that the his tax liability
alimony was notincorrectly.
taxable.What Use an IRS available tax serviceidentified
audit procedure to determine his tax if Denzel
return is forcorrect.
audit? Would
lems throughout the end of LO 2-2 your 55.answer
Randy change
deducted if Matta high andlevel
Loriofcontinued
itemizedto live together?
deductions two years ago relative to
73. Shaun his
is a income
huge level.
college He
football recently
fan. received
In the an
past, IRS
he has notice
always requesting
bought documentation
football
the chapter assignment mate-
LO 2-5
tickets on forthe
his street
itemized from deductions.
ticket scalpers. WhatThis audit procedure
year, he decided likely toidentified
join the his tax return
research university’sfor audit?
ticket program, which requires a $2,000 contribution to the university
rial. These require students to for the “right” to purchase tickets. Shaun will then pay $400 per season ticket.
Shaun
spi34872_ch02_000-035.indd Page 2-33 20/10/14 understands
4:06 PM f-500 that the price paid for the season tickets is not tax deductible
/202/MH02357/spi34872_disk1of1/1259334872/spi34872_pagefiles

do both basic and more complex research on topics outside of the scope of the book. Each
­research problem includes an icon to differentiate it from regular problems. 4-40 CHAPTER 4 Individual Income Tax Overview, Exemptions, and Filing Status
CHAPTER 2 Tax Compliance, the IRS, and Tax Authorities 2-33
spi4866x_ch02_000-035.indd 32 1/19/16 11:23 AM
filing a separate tax return. In year 4, the couple divorced. Both Jasper and
52. Sophia recently won aCrewella
tax case filed
litigated
singlein tax
the returns
7th Circuit.
in yearShe4.recently
In year 5, heard
the IRS audited
LO 2-2 the couple’s

“The textbook is comprehensive, uses an integrated approach to taxation, contains clear illustra-
that the Supreme Court
not, and why?
jointdenied
year the
2 taxwrit and eachShould
of certiorari.
return spouse’s she be happy
separate yearor3 tax returns. The IRS
determined that the year 2 joint return and Crewella’s separate year 3 tax return
tions and examples in each chapter, and has a wealth of end-of-chapter assignment material.”
53. Campbell’s tax return understated
on her tax return. What taxIRSliability
Crewella’s
was audited because
audittoselection
sheself-employment
be understated
methodby $4,000 and
identified
incomeshe
failed to report interest causing
her Crewella’s
earned the joint return year 2
LO 2-2
tax return?year 3 separate return
tax liability to be understated by $6,000. The IRS also assessed penalties and
54. Yong’s tax return was audited because he calculated his tax liability incorrectly.
– James P. Trebby, Marquette University
LO 2-2
interest on both of these tax returns. Try as it might, the IRS has not been able
What IRS audit procedure identified his tax return for audit?
to locate Crewella, but they have been able to find Jasper.
55. Randy deducted a high a) level
Whatofamount
itemized of deductions
tax can the two IRSyears
requireagoJasper
relative to for the
to pay LO 2-2
Dahvill’s year
his income level. He recently received
2 joint return?an IRS notice requesting documentation
Explain.
for his itemized deductions. What audit procedure likely identified his tax
b) What amount of tax can the IRS require Jasper to pay for Crewella’s year 3
return for audit?
Planning Problems Planning problems
separate tax return? Explain.
56. Jackie has a corporate
LO 4-3
client Traylor
51. Janice that hasisrecently
single. She received
has an a 30-day noticeson
18-year-old from
namedthe Marty.
LO 2-2
Marty is
IRS with a $100,000 tax assessment.
Janice’s Her Marty
only child. client ishasconsidering
lived with requesting an life. However, Marty
Janice his entire planning
are another unique set of problems, appeals conference
research to contest the
Duringrequesting
assessment.
the currentanyear,
What
appeals
Marty
factors
conference?
should Jackie advise
recently joined the Marines and was sent on a special assignment to Australia.
her client to consider before spent nine months in Australia. Marty was

also located at the end of the chapter 57. The IRS recently completedextremely
home. However,
additional tax. Shea requested
homesick
an audit
an appealsMarty
whiletax
of Shea’s in Australia,
return andsince
knew this
conference butassignment
was unablewas
he had
assessed never livedLOaway
$15,000
only the
to settle
2-2 from
temporary, and he
planning
case at the conference.couldn’t wait to come which
She is contemplating home and trial find
courthis
toroom
choose justtothe
hear way he left it. Janice has
assignment material. These require her case. Provide her aalways
a) Shea resides in the qualifying
filed as head
recommendation
2nd Circuit, child
and(and
of household,
based
the 2ndhe continues
Circuit has
and Marty
on the following
to recently
has always
alternative
meet all ruled
the tests
facts:been considered a
with the possible excep-
against
­students to test their tax planning skills the position Shea istion of the residence test due to his stay in Australia). However, this year Janice
litigating.
b) The Federal CircuitisCourt unsureofwhether
Appealsshe hasqualifies
recentlyasruled
headinoffavor
household
of Shea’s due to Marty’s nine-

after covering the chapter topics. Each planning problem includes an icon to differentiate it from
position. month absence during the year. Janice has come to you for advice on whether
she qualifies for head of household filing status. What do you tell her?
c) The issue being litigated involves a question of fact. Shea has a very appealing
tell but52. Doug Jones case
submitted
law to his 2016 her tax return on time and elected married filing
regular problems. story LO
to 4-3 little favorable support position.
jointly status with his wife, Darlene. Doug and Darlene did not request an
d) The issue being litigated is highly technical, and Shea believes strongly in her
research extension for their 2016 tax return. Doug and Darlene owed and paid the IRS
interpretation of the law.
$124,000 for their 2016 tax year. Two years later, Doug amended his return and
e) Shea is a local elected officialmarried
and would
filingprefer to minimize any local publicity
Comprehensive and Tax Return Problems Comprehensive and tax return problems address mul- claimed

original joint is
return
separate status. By

than heaowed
changing

on a separate
his filing status, Doug
regarding the case. sought a refund for an overpayment for the tax year 2016 (he paid more tax in
the (5th return).
a IsLO Doug
58. Juanita, a Texas resident Circuit), researching tax question and finds 2-3 allowed to
tiple concepts in a single problem. Comprehensive problems are ideal for cumulative topics; for
5th Circuit case rulingchange his filing status
that is favorable
Which circuit case hasamended return?
more “authoritative
and a 9thfor the 2016case
Circuit tax that
yearisand
weight” and why? How would your
receive a tax refund with his
unfavorable.

this reason, they are located at the end answer change if Juanita were a Kentucky resident (6th Circuit)?
59. Faith, a resident of Florida (11th Circuit) recently found a circuit court case LO 2-3
that is favorable toCOMPREHENSIVE PROBLEMS
of all chapters. In the end-of-book her research question. Which
to have issued the opinion?
two circuits would she prefer

Select problems are available in Connect . ®

Appendix C, we include tax return 60. Robert has found a “favorable” authority directly on point for his tax question.
If the authority is53.
a court
Marccase,
opinion? Which court$12,000,
which court
and Michelle
would he
are would
marriedheand
tax forms
least preferIntoaddition
prefer
have issued
to have
earned issued
salaries
the salaries,
thisthe
year of $64,000 and
opinion?they received interest of $350
LO 2-3

respectively. to their
problems that cover multiple chapters. from municipal
61. Jamareo has found a “favorable” bondsdirectly
authority
paid $2,500 of authority,
If the authority is an administrative
and $500
qualifyingwhich
moving
from corporate
on point for his tax bonds.
expenses,
specific typeand
Marc and Michelle also
question.
Marc paid alimony to a prior
of authority
LO 2-3

Additional tax return problems are also spouse

available in the Connect Library.
would he prefer to answer hisinquestion?
Matthew,
he least prefer to answer
the amount
Whichof $1,500. Marc and
administrative Michelle
authority have a 10-year-old son,
would
who lived with them throughout the entire year. Thus, Marc and
his question?
Michelle are allowed to claim a $1,000 child tax credit for Matthew. Marc and
62. For each of the following citations, identify the type of authority (statutory,
Michelle paid $6,000 of expenditures that qualify as itemized deductions and
administrative, or judicial) and explain the citation.
they had a total of $5,500 in federal income taxes withheld from their
LO 2-3

a) Reg. Sec. 1.111-1(b)paychecks during the course of the year.

b) IRC Sec. 469(c)(7)(B)(i)
a) What is Marc and Michelle’s gross income?
c) Rev. Rul. 82-204, 1982-2 C.B.
b) What 192 and Michelle’s adjusted gross income?
is Marc xvii
d) Amdahl Corp., 108 c)TCWhat
507 (1997)
is the total amount of Marc and Michelle’s deductions from AGI?
e) PLR 9727004
f ) Hills v. Comm., 50 AFTR2d 82-6070 (11th Cir., 1982)

McGraw-Hill’s Taxation of Individuals is organized to em-
phasize topics that are most important to undergraduates
taking their first tax course. The first three chapters provide
an introduction to taxation and then carefully guide students
through tax research and tax planning. Part II discusses the
fundamental elements of individual income tax, starting with
the tax formula in Chapter 4 and then proceeding to more
depth on individual topics in Chapters 5–7. Part III then dis-
cusses tax issues associated with business and investment ac-
tivities. On the business side, it addresses business income and
deductions, accounting methods, and tax consequences asso-
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portfolio-type investments such as stocks and bonds and
business investments including loss limitations associated
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Part I: Introduction to Taxation
1. An Introduction to Tax
2. Tax Compliance, the IRS, and Tax Authorities
3. Tax Planning Strategies and Related Limitations
Part II: Basic Individual Taxation
4. Individual Income Tax Overview
5. Gross Income and Exclusions
6. Individual Deductions
7. Individual Income Tax Computation and Tax Credits
Part III: Business- and Investment-Related Transactions
8. Business Income, Deductions, and Accounting Methods
9. Property Acquisition and Cost Recovery
10. Property Dispositions
11. Investments
Part IV: Specialized Topics
12. Compensation
13. Retirement Savings and Deferred Compensation
14. Tax Consequences of Home Ownership
xviii
Four Volumes to Fit…
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process for determining gross income and deductions for
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Part I: Business- and Investment-Related Transactions
1. Business Income, Deductions, and Accounting Methods
2. Property Acquisition and Cost Recovery
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Part II: Entity Overview and Taxation of C Corporations
4. Entities Overview
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Part III: Taxation of Flow-Through Entities
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14. Transfer Taxes and Wealth Planning
…Four Course Approaches
McGraw-Hill’s Taxation of Individuals and Busi-
ness Entities covers all chapters included in the
two split volumes in one convenient volume.
See Table of Contents.
McGraw-Hill’s Essentials of Federal Taxation is designed for
a one-semester course, covering the basics of taxation of in-
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Individuals into three individual taxation chapters that dis-
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from AGI deductions, respectively. The essentials volume
also includes a two-chapter C corporation sequence that uses
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This volume is perfect for those teaching a one-semester
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Part I: Introduction to Taxation
1. An Introduction to Tax
2. Tax Compliance, the IRS, and Tax Authorities
3. Tax Planning Strategies and Related Limitations
Part II: Individual Taxation
4. Individual Income Tax Overview
5. Gross Income and Exclusions
6. Individual for AGI Deductions
7. Individual from AGI Deductions
8. Individual Income Tax Computation and Tax Credits
Part III: Business-Related Transactions
9. Business Income, Deductions, and Accounting Methods
10. Property Acquisition and Cost Recovery
11. Property Dispositions
Part IV: Entity Overview and Taxation of C Corporations
12. Entities Overview
13. Corporate Formations and Operations
14. Corporate Nonliquidating and Liquidating Distributions
Part V: Taxation of Flow-Through Entities
15. Forming and Operating Partnerships
16. Dispositions of Partnership Interests and Partnership
Distributions
17. S Corporations
xix
SUPPLEMENTS FOR INSTRUCTORS
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A HEARTFELT THANKS TO THE MANY COLLEAGUES WHO SHAPED THIS BOOK
The version of the book you are reading would not be the same book without the valuable suggestions, keen in-
sights, and constructive criticisms of the list of reviewers below. Each professor listed here contributed in substantive
ways to the organization of chapters, coverage of topics, and the use of pedagogy. We are grateful to them for tak-
ing the time to read chapters or attend reviewer conferences, focus groups, and symposia in support of the develop-
ment for the book:
Previous Edition Reviewers Teresa Lightner, University of North Texas
Kevin Baugess, ICDC College Robert Lin, California State University East Bay
Christopher Becker, Coastal Carolina University Kate Mantzke, Northern Illinois University
Jeanne Bedell, Keiser University Robert Martin, Kennesaw State University
Lisa Blum, University of Louisville Anthony Masino, East Tennessee State University
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Troy Lewis, Brigham Young University Mingjun Zhou, DePaul University

Acknowledgments
We would like to thank the many talented people who made valuable contributions to the creation of this eighth
­edition. William A. Padley of Madison Area Technical College, Deanna Sharpe of the University of Missouri—­
Columbia, and Troy Lewis of Brigham Young University checked the page proofs, test bank, and solutions manual
for accuracy; we greatly appreciate the hours they spent checking tax forms and double-checking our calculations
throughout the book. Special thanks to Troy Lewis of Brigham Young University for his sharp eye and valuable
feedback throughout the revision process. Sarah Wood from Agate Publishing for managing the supplement
­process. William A. Padley of Madison Area Technical College, Deanna Sharpe of the University of Missouri,
­Vivian Paige of Old Dominion University, and Teressa Farough greatly contributed to the accuracy of
­McGraw-Hill’s Connect for the 2017 edition.
We also appreciate the expert attention given to this project by the staff at McGraw-Hill Education, especially Tim
Vertovec, Managing Director; Kathleen Klehr, Senior Brand Manager; Danielle Andries, Product Developer; Lori
Koetters, Brian Nacik, and Jill Eccher, Content Project Managers; Matthew Diamond, Designer; and Sue
­Culbertson, Senior Buyer.

xxi
Changes in Taxation of Individuals,
2017 Edition
For the 2017 edition of McGraw Hill’s Taxation of Individuals, many changes were made in re-
sponse to feedback from reviewers and focus group participants:
• All tax forms have been updated for the latest avail-
able tax form as of January 2016. In addition, chap-
ter content throughout the text has been updated to
reflect tax law changes through January 2016.
Other notable changes in the 2017 edition include:
Chapter 2
• Updated for 2016 inflation adjustments and legis-
lative changes.
• Updated discussion of tax return due dates.
Chapter 3
• Updated tax rates for 2016.
• Updated Exhibit 3-3 for new tax rates.
• Added new Taxes in the Real World.
• Added new Ethics box.
Chapter 4
• Updated personal exemption amounts for 2016.
• Updated standard deduction amounts for 2016.
• Updated tax rates for 2016.
• Moved rates from back cover of text to new ap-
pendix near end of the book.
• Updated tax forms from 2014 to 2015 forms.
• Revised the discussion relating to character of
income.
• Revised the opening paragraph in the Personal and
Dependency Exemptions section.
• Updated the taxes in the real world on “Tax status
for same-sex married couples” to reflect recent de-
velopments in the area.
Chapter 5
• Updated for legislative changes.
• Updated for 2016 inflation adjustments.
• Updated for new tax forms.
Chapter 6
• Updated for legislative changes.
• Updated for 2016 inflation adjustments.
• Updated for new tax forms.
Chapter 7
• Updated tax rates for 2016.
• Updated tax forms from 2014 to 2015.
xxii
• Revised and streamlined the discussion of capital
gains netting process.
• Revised the step-by-step capital gains netting
process.
• Revised capital gains examples.
• Clarified Example 7-14 on investment interest
expense.
Chapter 8
• Updated for legislative changes.
• Updated for 2016 inflation adjustments.
• Revised Kiddie Tax discussion.
• Updated for new tax forms.
Chapter 9
• Added new standard business mileage.
• Updated for new tax forms.
Chapter 10
• Updated tax rates for 2016.
• Updated tax forms from 2014 to 2015.
• Added new discussion for repair regulations.
• Added example on repair regulations.
• Added new end-of-chapter problems for repair
regulations.
Chapter 11
• Updated tax rates for 2016.
• Updated tax forms from 2014 to 2015.
• Added discussion about holding period for dual ba-
sis rules.
• Added discussion about holding period for related
party losses.
• Updated end-of-chapter problems.
Chapter 13
• Updated inflation adjusted limits for defined bene-
fit plans, defined contribution plans, and individu-
ally managed plans.
• Added new taxes in the real world about Jeb Bush’s
defined benefit plan.
• Updated AGI phase-out thresholds for deductible
contributions to traditional IRAs and contribu-
tions to Roth IRAs.
 • Clarified the tax consequences of nonqualified dis-
tributions from Roth type retirement accounts.
• Clarified how the earned income limit applies to
nondeductible contributions to IRAs.
• Clarified the contribution limits for Individual
401(k) retirement plans.
• Added a problem comparing the tax consequences
of potential early distributions from traditional
401(k) and a Roth 401(k) retirement accounts.
• Updated Saver’s credit information.
Chapter 14
• Updated URL in footnote 4.
• Added mortgage insurance deduction to Exhibit 14-1.
As We Go to Press
The 2017 Edition is current through March 4, 2016. You can visit the Connect
Library for updates that occur after this date.
• Added new taxes in the real world called “Double
take on home-related interest deductions.”
• Removed taxes in the real world called “Extreme
tax savings strategy” that dealt with how contes-
tants on “Extreme makeover: Home Edition”
treated their benefit for tax purposes.
• Updated Example 14-15 dealing with the IRS
method vs. Tax court method of allocating rent ex-
pense to reflect leap year in 2016.
• Updated tax forms from 2014 forms to 2015
forms.
• Updated settlement statement in Appendix A.
xxiii
Table of Contents

1 An Introduction to Tax Tax Law Sources 2-9

Legislative Sources: Congress and the
Who Cares about Taxes and Why? 1-2 Constitution 2-11
What Qualifies as a Tax? 1-3 Internal Revenue Code 2-11
How to Calculate a Tax 1-5 The Legislative Process for Tax Laws 2-12
Different Ways to Measure Tax Rates 1-5 Basic Organization of the Code 2-13
Tax Treaties 2-14
Tax Rate Structures 1-9
Judicial Sources: The Courts 2-14
Proportional Tax Rate Structure 1-9
Administrative Sources: The U.S.
Progressive Tax Rate Structure 1-9
Treasury 2-15
Regressive Tax Rate Structure 1-10
Regulations, Revenue Rulings, and
Types of Taxes 1-11 Revenue Procedures 2-15
Federal Taxes 1-11 Letter Rulings 2-16
Income Tax 1-12 Tax Research 2-17
Employment and Unemployment Step 1: Understand Facts 2-17
Taxes 1-12
Step 2: Identify Issues 2-17
Excise Taxes 1-13
Step 3: Locate Relevant Authorities 2-18
Transfer Taxes 1-13
Step 4: Analyze Tax Authorities 2-19
State and Local Taxes 1-14
Step 5: Document and Communicate the
Income Taxes 1-14 Results 2-21
Sales and Use Taxes 1-14 Facts 2-21
Property Taxes 1-15 Issues 2-21
Excise Taxes 1-15 Authorities 2-22
Implicit Taxes 1-16 Conclusion 2-22
Evaluating Alternative Tax Systems 1-17 Analysis 2-22
Sufficiency 1-18 Client Letters 2-22
Static vs. Dynamic Forecasting 1-18 Research Question and Limitations 2-22
Income vs. Substitution Effects 1-19 Facts 2-22
Equity 1-20 Analysis 2-22
Horizontal vs. Vertical Equity 1-21 Closing 2-22
Certainty 1-22 Tax Professional Responsibilities 2-23
Convenience 1-22
Taxpayer and Tax Practitioner Penalties 2-26
Economy 1-22
Conclusion 2-28
Evaluating Tax Systems—The Trade-Off 1-23
Conclusion 1-23 3 Tax Planning Strategies and
Related Limitations
2 Tax Compliance, the IRS, and Tax
Basic Tax Planning Overview 3-2
Authorities
Timing Strategies 3-2
Taxpayer Filing Requirements 2-2 Present Value of Money 3-3
Tax Return Due Date and Extensions 2-3 The Timing Strategy When Tax Rates Are
Statute of Limitations 2-3 Constant 3-4
IRS Audit Selection 2-4 The Timing Strategy When Tax Rates
Types of Audits 2-5 Change 3-7
After the Audit 2-6 Limitations to Timing Strategies 3-10

xxv
xxvi Table of Contents

Income-Shifting Strategies 3-11 5 Gross Income and Exclusions

Transactions between Family Members and
Limitations 3-11 Realization and Recognition of Income 5-2
Transactions between Owners and Their What Is Included in Gross Income? 5-2
Businesses and Limitations 3-12 Economic Benefit 5-3
Income Shifting across Jurisdictions and Realization Principle 5-3
Limitations 3-15 Recognition 5-4
Conversion Strategies 3-16 Other Income Concepts 5-4
Limitations of Conversion Form of Receipt 5-4
Strategies 3-19 Return of Capital Principle 5-4
Additional Limitations to Tax Planning Recovery of Amounts Previously
Strategies: Judicial Doctrines 3-19 Deducted 5-5
Tax Avoidance versus Tax Evasion 3-20 When Do Taxpayers Recognize Income? 5-6
Accounting Methods 5-6
Conclusion 3-21
Constructive Receipt 5-7
Claim of Right 5-7
Who Recognizes the Income? 5-8
4 Individual Income Tax Overview, Assignment of Income 5-8
Exemptions, and Filing Status Community Property Systems 5-8
The Individual Income Tax Formula 4-2 Types of Income 5-9
Gross Income 4-2 Income from Services 5-10
Character of Income 4-5 Income from Property 5-10
Deductions 4-7 Annuities 5-11
For AGI Deductions 4-7 Property Dispositions 5-13
From AGI Deductions 4-8 Other Sources of Gross Income 5-14
Income Tax Calculation 4-10 Income from Flow-through
Other Taxes 4-10 Entities 5-14
Tax Credits 4-11 Alimony 5-14
Tax Prepayments 4-11 Prizes, Awards, and Gambling
Winnings 5-16
Personal and Dependency Exemptions 4-12
Social Security Benefits 5-17
Dependency Requirements 4-12
Imputed Income 5-19
Qualifying Child 4-12
Discharge of Indebtedness 5-20
Qualifying Relative 4-15
Exclusion and Deferral Provisions 5-21
Filing Status 4-19
Common Exclusions 5-21
Married Filing Jointly and Married Filing
Separately 4-19 Municipal Interest 5-21
Qualifying Widow or Widower (Surviving Gains on the Sale of Personal
Spouse) 4-20 Residence 5-22
Single 4-21 Fringe Benefits 5-23
Head of Household 4-21 Education-Related Exclusions 5-25
Married Individuals Treated as Unmarried Scholarships 5-25
(Abandoned Spouse) 4-23 Other Educational Subsidies 5-25
Summary of Income Tax Formula 4-24 U.S. Series EE bonds 5-26
Exclusions That Mitigate Double
Conclusion 4-27
Taxation 5-26
Appendix A: Dependency Exemption Flowchart Gifts and Inheritances 5-26
(Part I) 4-27
Life Insurance Proceeds 5-27
Appendix A: (Part II) 4-28 Foreign-Earned Income 5-28
Appendix B: Qualifying Person for Head of Sickness and Injury-Related Exclusions 5-29
Household Filing Status 4-29 Workers’ Compensation 5-29
Appendix C: Determination of Filing Status Payments Associated with Personal
Flowchart 4-30 Injury 5-29

Health Care Reimbursement 5-30
Disability Insurance 5-30
Deferral Provisions 5-31
Income Summary 5-31
Conclusion 5-32
Appendix: 2015 Social Security Worksheet from
Form 1040 5-33
6 Individual Deductions
Deductions for AGI 6-2
Deductions Directly Related to Business
Activities 6-2
Trade or Business Expenses 6-4
Rental and Royalty Expenses 6-5
Losses 6-6
Flow-through Entities 6-6
Deductions Indirectly Related to Business
Activities 6-6
Moving Expenses 6-6
Health Insurance Deduction by Self-
Employed Taxpayers 6-8
Self-Employment Tax Deduction 6-9
Penalty for Early Withdrawal of
Savings 6-9
Deductions Subsidizing Specific
Activities 6-9
Deduction for Interest on Qualified
Education Loans 6-10
Deduction for Qualified Education
Expenses 6-11
Summary: Deductions for AGI 6-12
Deductions from AGI: Itemized
Deductions 6-13
Medical Expenses 6-13
Transportation and Travel for Medical
Purposes 6-15
Hospitals and Long-Term Care
Facilities 6-15
Medical Expense Deduction
Limitation 6-15
Taxes 6-16
Interest 6-17
Charitable Contributions 6-18
Contributions of Money 6-19
Contributions of Property Other Than
Money 6-20
Charitable Contribution Deduction
Limitations 6-21
Casualty and Theft Losses on Personal-Use
Assets 6-23
Tax Loss from Casualties 6-24
Casualty Loss Deduction Floor
Limitations 6-24
Table of Contents xxvii
Miscellaneous Itemized Deductions Subject
to AGI Floor 6-26
Employee Business Expenses 6-26
Investment Expenses 6-28
Tax Preparation Fees 6-29
Hobby Losses 6-29
Limitation on Miscellaneous Itemized
Deductions (2 percent of AGI Floor) 6-31
Miscellaneous Itemized Deductions Not
Subject to AGI Floor 6-31
Phase-out of Itemized Deductions 6-32
Summary of Itemized Deductions 6-32
The Standard Deduction and Exemptions 6-34
Standard Deduction 6-34
Bunching Itemized Deductions 6-36
Deduction for Personal and Dependency
Exemptions 6-36
Taxable Income Summary 6-37
Conclusion 6-38
Appendix A: Calculation of Itemized Deduction
Phase-out for 2015 6-38
Appendix B: Personal Exemption Phase-out
Computation for 2015 6-39
7 Investments
Investments Overview 7-2
Portfolio Income: Interest and Dividends 7-2
Interest 7-3
Corporate and U.S. Treasury Bonds 7-3
U.S. Savings Bonds 7-4
Dividends 7-6
Portfolio Income: Capital Gains and
Losses 7-7
Types of Capital Gains and Losses 7-10
25 Percent Gains 7-10
28 Percent Gains 7-10
Netting Process for Gains and
Losses 7-12
Calculating Tax Liability on Net Capital
Gains 7-16
Limitations on Capital Losses 7-21
Losses on the Sale of Personal-Use
Assets 7-21
Capital Losses on Sales to Related
Parties 7-22
Wash Sales 7-22
Balancing Tax Planning Strategies for Capital
Assets with Other Goals 7-23
Portfolio Income Summary 7-25
Portfolio Investment Expenses 7-25
Investment Expenses 7-25
xxviii Table of Contents
Investment Interest Expense 7-26
Net Investment Income 7-27
Net Investment Income Tax 7-29
Passive Activity Income and Losses 7-29
Passive Activity Definition 7-30
Income and Loss Categories 7-31
Rental Real Estate Exception to the Passive
Activity Loss Rules 7-33
Net Investment Income Tax on Net Passive
Income 7-34
Conclusion 7-34
9 Business Income, Deductions, and
8 Individual Income Tax Computation
and Tax Credits
Regular Federal Income Tax Computation 8-2
Tax Rate Schedules 8-2
Marriage Penalty or Benefit 8-3
Exceptions to the Basic Tax
Computation 8-3
Preferential Tax Rates for Capital Gains
and Dividends 8-4
Net Investment Income Tax 8-5
Kiddie Tax 8-6
Alternative Minimum Tax 8-8
Alternative Minimum Tax Formula 8-9
Alternative Minimum Taxable Income
(AMTI) 8-9
AMT Exemption 8-12
Tentative Minimum Tax and AMT
Computation 8-13
General AMT Planning Strategies 8-14
Employment and Self-Employment
Taxes 8-14
Employee FICA Taxes Payable 8-15
Self-Employment Taxes 8-17
Employee vs. Self-Employed (Independent
Contractor) 8-22
Employee vs. Independent Contractor
Comparison 8-22
Tax Credits 8-24
Nonrefundable Personal Credits 8-25
Child Tax Credit 8-25
Child and Dependent Care Credit 8-26
Education Credits 8-28
Refundable Personal Credits 8-31
Earned Income Credit 8-31
Other Refundable Personal Credits 8-32
Business Tax Credits 8-33
Foreign Tax Credit 8-33
Tax Credit Summary 8-34
Credit Application Sequence 8-34
Taxpayer Prepayments and Filing
Requirements 8-35
Prepayments 8-36
Underpayment Penalties 8-36
Filing Requirements 8-38
Late Filing Penalty 8-38
Late Payment Penalty 8-39
Tax Summary 8-39
Conclusion 8-41
Accounting Methods
Business Gross Income 9-2
Business Deductions 9-2
Ordinary and Necessary 9-3
Reasonable in Amount 9-4
Limitations on Business Deductions 9-5
Expenditures against Public Policy 9-5
Political Contributions and Lobbying
Costs 9-5
Capital Expenditures 9-6
Expenses Associated with the Production of
Tax-Exempt Income 9-6
Personal Expenditures 9-7
Mixed-Motive Expenditures 9-8
Meals and Entertainment 9-8
Travel and Transportation 9-9
Property Use 9-11
Record Keeping and Other
Requirements 9-11
Specific Business Deductions 9-12
Domestic Production Activities
Deduction 9-12
Losses on Dispositions of Business
Property 9-13
Business Casualty Losses 9-14
Accounting Periods 9-15
Accounting Methods 9-16
Financial and Tax Accounting
Methods 9-17
Overall Accounting Method 9-17
Cash Method 9-17
Accrual Method 9-18
Accrual Income 9-19
All-Events Test for Income 9-19
Taxation of Advance Payments of Income
(Unearned Income) 9-19
Unearned Service Revenue 9-20
Advance Payment for Goods 9-20

Inventories 9-21
Uniform Capitalization 9-21
Inventory Cost-Flow Methods 9-22
Accrual Deductions 9-24
All-Events Test for Deductions 9-24
Economic Performance 9-24
Bad Debt Expense 9-27
Limitations on Accruals to Related
Parties 9-28
11 Property Dispositions
Comparison of Accrual and Cash
Methods 9-29
Adopting an Accounting Method 9-30
Changing Accounting Methods 9-33
Tax Consequences of Changing
Accounting Method 9-33
Conclusion 9-34
10 Property Acquisition and Cost
Recovery
Cost Recovery and Basis for Cost
Recovery 10-2
Basis for Cost Recovery 10-3
Depreciation 10-6
Personal Property Depreciation 10-7
Depreciation Method 10-7
Depreciation Recovery Period 10-8
Depreciation Conventions 10-9
Calculating Depreciation for Personal
Property 10-9
Applying the Half-Year Convention 10-10
Applying the Mid-Quarter
Convention 10-13
Real Property 10-16
Applicable Method 10-17
Applicable Convention 10-17
Depreciation Tables 10-17
Special Rules Relating to Cost
Recovery 10-18
Immediate Expensing 10-18
Listed Property 10-24
Luxury Automobiles 10-26
Depreciation for the Alternative Minimum
Tax 10-29
Depreciation Summary 10-29
Amortization 10-31
Section 197 Intangibles 10-31
Organizational Expenditures and Start-Up
Costs 10-32
Research and Experimentation
Expenditures 10-35
Patents and Copyrights 10-35
Table of Contents xxix
Amortizable Intangible Asset
Summary 10-36
Depletion 10-37
Conclusion 10-39
Appendix: MACRS Tables 10-40
Dispositions 11-2
Amount Realized 11-2
Determination of Adjusted Basis 11-3
Gifts 11-3
Inherited Property 11-3
Property Converted from Personal Use to
Business Use 11-3
Realized Gain or Loss on
Disposition 11-5
Recognized Gain or Loss on
Disposition 11-6
Character of Gain or Loss 11-7
Ordinary Assets 11-7
Capital Assets 11-8
§1231 Assets 11-9
Depreciation Recapture 11-9
§1245 Property 11-10
Scenario 1: Gain Created Solely through
Cost Recovery Deductions 11-11
Scenario 2: Gain Due to Both Cost
Recovery Deductions and Asset
Appreciation 11-11
Scenario 3: Asset Sold at a Loss 11-12
§1250 Depreciation Recapture for Real
Property 11-13
Other Provisions Affecting the Rate at Which
Gains Are Taxed 11-14
Unrecaptured §1250 Gain for
Individuals 11-14
Characterizing Gains on the Sale of
Depreciable Property to Related
Persons 11-16
Calculating Net §1231 Gains or Losses 11-16
§1231 Look-Back Rule 11-18
Gain or Loss Summary 11-20
Nonrecognition Transactions 11-20
Like-Kind Exchanges 11-20
Definition of Like-Kind Property 11-24
Real Property 11-24
Personal Property 11-24
Property Ineligible for Like-Kind
Treatment 11-25
Property Use 11-25
xxx Table of Contents
Timing Requirements for a Like-Kind
Exchange 11-25
Tax Consequences When Like-Kind Property
Is Exchanged Solely for Like-Kind
Property 11-27
Tax Consequences of Transfers Involving
Like-Kind and Non-Like-Kind Property
(Boot) 11-27
Reporting Like-Kind Exchanges 11-29
Involuntary Conversions 11-29
Installment Sales 11-32
Gains Ineligible for Installment Reporting 11-34
Other Nonrecognition Provisions 11-34
Related-Person Loss Disallowance Rules 11-35
Conclusion 11-36
13 Retirement Savings and Deferred
12 Compensation
Salary and Wages 12-2
Employee Considerations for Salary and
Wages 12-2
Tax Withholding 12-2
Employer Considerations for Salary and
Wages 12-3
Deductibility of Salary Payments 12-3
Equity-Based Compensation 12-7
Stock Options 12-8
Employee Considerations for Stock
Options 12-10
Employer Considerations for Stock
Options 12-13
Restricted Stock 12-15
Employee Considerations for Restricted
Stock 12-16
Employer Considerations for Restricted
Stock 12-18
Equity-Based Compensation Summary 12-19
Fringe Benefits 12-19
Taxable Fringe Benefits 12-20
Employee Considerations for Taxable
Fringe Benefits 12-20
Employer Considerations for Taxable
Fringe Benefits 12-22
Nontaxable Fringe Benefits 12-24
Group-Term Life Insurances 12-24
Health and Accident Insurance and
Benefits 12-25
Meals and Lodging for the Convenience
of the Employer 12-25
Employee Educational Assistance 12-26
Dependent Care Benefits 12-26
No-Additional-Cost Services 12-26
Qualified Employee Discounts 12-27
Working Condition Fringe Benefits 12-28
De Minimis Fringe Benefits 12-28
Qualified Transportation Fringe 12-28
Qualified Moving Expense
Reimbursement 12-28
Cafeteria Plans and Flexible Spending
Accounts (FSAs) 12-29
Employee and Employer Considerations
for Nontaxable Fringe Benefits 12-29
Tax Planning with Fringe Benefits 12-30
Fringe Benefits Summary 12-31
Conclusion 12-33
Compensation
Employer-Provided Qualified Plans 13-3
Defined Benefit Plans 13-3
Vesting 13-4
Distributions 13-5
Nontax Considerations 13-5
Defined Contribution Plans 13-6
Employer Matching 13-6
Contribution Limits 13-7
Vesting 13-7
After-Tax Cost of Contributions to Traditional
(non-Roth) Defined Contribution Plans 13-8
Distributions From Traditional Defined
Contribution Plans 13-9
After-Tax Rates of Return for Traditional
Defined Contribution Plans 13-11
Roth 401(k) Plans 13-11
Comparing Traditional Defined Contribution
Plans and Roth 401(k) Plans 13-14
Nonqualified Deferred Compensation 13-15
Nonqualified Plans vs. Qualified Defined
Contribution Plans 13-15
Employee Considerations 13-16
Employer Considerations 13-18
Individually Managed Qualified Retirement
Plans 13-19
Individual Retirement Accounts 13-19
Traditional IRAs 13-20
Contributions 13-20
Nondeductible Contributions 13-22
Distributions 13-23
Roth IRAs 13-23
Contributions 13-23
Distributions 13-24
Rollover from Traditional to Roth IRA 13-25
Comparing Traditional and Roth IRAs 13-26

Self-Employed Retirement Accounts 13-27
Simplified Employee Pension (SEP) IRA 13-27
Nontax Considerations 13-28
Individual 401(k)s 13-28
Nontax Considerations 13-30
Saver’s Credit 13-30
Conclusion 13-31
Appendix A: Traditional IRA Deduction
Limitations 13-32
Appendix B: Roth IRA Contribution Limits 13-34
14 Tax Consequences of Home
Ownership
Personal Use of the Home 14-3
Exclusion of Gain on Sale of Personal
Residence 14-4
Requirements 14-5
Exclusion of Gain from Debt Forgiveness
on Foreclosure of Home
Mortgage 14-8
Interest Expense on Home-Related
Debt 14-8
Limitations on Home-Related
Debt 14-9
Mortgage Insurance 14-13
Points 14-13
Real Property Taxes 14-15
Table of Contents xxxi
Rental Use of the Home 14-17
Residence with Minimal Rental Use 14-17
Residence with Significant Rental Use
(Vacation Home) 14-18
Nonresidence (Rental Property) 14-21
Losses on Rental Property 14-23
Business Use of the Home 14-25
Direct vs. Indirect Expenses 14-27
Limitations on Deductibility of Expenses 14-28
Conclusion 14-30
Appendix A: Sample Settlement Statement for
the Jeffersons 14-32
Appendix B: Flowchart of Tax Rules Relating to
Home Used for Rental Purposes 14-34
Appendix A Tax Forms A-1
Appendix B Tax Terms Glossary B
Appendix C Comprehensive Tax Return
Problems C
Appendix D Tax Rates D
Code Index CI-1
Subject Index SI-1
 McGraw–Hill’s

Taxation of Individuals
 chapter

1 An Introduction to Tax

Learning Objectives

Upon completing this chapter, you should be able to:

LO 1-1 Demonstrate how taxes influence basic business, investment, personal, and political
decisions.

LO 1-2 Discuss what constitutes a tax and the general objectives of taxes.

LO 1-3 Describe the different tax rate structures and calculate a tax.

LO 1-4 Identify the various federal, state, and local taxes.

LO 1-5 Apply appropriate criteria to evaluate alternate tax systems.

 Storyline Summary
Taxpayers: Margaret

Employment status:  argaret is a full-time student

M
at the University of Georgia.

Current situation: She is beginning her first

tax class.

© Andrew Rich/Getty Images

M
argaret is a junior beginning her
first tax course. She is excited about
her career prospects as an account-
ing major but hasn’t had much exposure to taxes.
On her way to campus she runs into an old
friend, Eddy, who is going to Washington, D.C.,
to protest recent proposed changes to the U.S.
tax system. Eddy is convinced the IRS is evil and
that the current tax system is blatantly unfair
and corrupt. He advocates a simpler, fairer way
of taxation. Margaret is intrigued by Eddy’s
­passion but questions whether he has a complete
understanding of the U.S. tax system. She ­decides
to withhold all judgments about it (or about pur-
suing a career in taxation) until the end of her
tax course. ■

1-1
1-2 CHAPTER 1 An Introduction to Tax

LO 1-1 WHO CARES ABOUT TAXES AND WHY?

A clear understanding of the role of taxes in everyday decisions will help you make
an informed decision about the value of studying taxation or pursuing a career in
taxation. One view of taxation is that it represents an inconvenience every April 15th
(the annual due date for filing federal individual tax returns without extensions).
However, the role of taxation is much more pervasive than this view suggests. Your
study of this subject will provide you a unique opportunity to develop an informed
opinion about taxation. As a business student, you can overcome the mystery that
encompasses popular impressions of the tax system and perhaps, one day, share your
expertise with friends or clients.
What are some common decisions you face that taxes may influence? In
this course, we alert you to situations in which you can increase your return on
investments by up to one-third! Even the best lessons in finance courses can’t ap-
proach the increase in risk-adjusted return that smart tax planning provides.
Would you like to own your home someday? Tax deductions for home mortgage
interest and real estate taxes can reduce the after-tax costs of owning a home rela-
tive to renting. Thus, when you face the decision to buy or rent, you can make an
informed choice if you understand the relative tax advantages of home owner-
ship. Would you like to retire someday? Understanding the tax-advantaged meth-
ods of saving for retirement can increase the after-tax value of your retirement
nest egg—and thus increase the likelihood that you can afford to retire, and do so
in style. Other common personal financial decisions that taxes influence include:
choosing investments, evaluating alternative job offers, saving for education ex-
penses, and doing gift or estate planning. Indeed, taxes are a part of everyday
life and have a significant effect on many of the personal financial decisions all of
us face.
The role of taxes is not limited to personal finance. Taxes play an equally impor-
tant role in fundamental business decisions such as the following:
• What organizational form should a business use?
• Where should the business locate?
• How should business acquisitions be structured?
• How should the business compensate employees?
• What is the appropriate mix of debt and equity for the business?
• Should the business rent or own its equipment and property?
• How should the business distribute profits to its owners?
Savvy business decisions require owners and managers to consider all costs and
benefits in order to evaluate the merits of a transaction. Although taxes don’t neces-
sarily dominate these decisions, they do represent large transaction costs that busi-
nesses should factor into the financial decision-making process.
Taxes also play a major part in the political process. U.S. presidential candi-
dates often distinguish themselves from their opponents based upon their tax rheto-
ric. Indeed, the major political parties generally have very diverse views of the
appropriate way to tax the public.1 Determining who is taxed, what is taxed, and
how much is taxed are tough questions with nontrivial answers. Voters must have a
basic understanding of taxes to evaluate the merits of alternative tax proposals.
Later in this chapter, we’ll introduce criteria you can use to evaluate alternative tax
proposals.

1
The U.S. Department of the Treasury provides a “history of taxation” on its Web site (www.treasury.
gov/resource-center/faqs/Taxes/Pages/historyrooseveltmessage.aspx). You may find it interesting to read
this history in light of the various political parties in office at the time.
 CHAPTER 1 An Introduction to Tax 1-3

TAXES IN THE REAL WORLD Republicans vs. Democrats

We often boil down the tax policy of our major
political parties into its simplest form: Demo-
crats raise taxes to fund social programs, and
Republicans lower taxes to benefit big busi-
nesses and the wealthy. Both ideas simplify the
policy of each party, yet both ideas are essen-
tially true.
Whether you agree with more government
spending or tax breaks for corporations, each
party’s agenda will affect your taxes.
Political Ideology: Republican
“We believe government should tax only to raise
money for its essential functions.” The Republi-
cans state their case plainly on the Republican
National Convention website. That is, Republi-
cans believe government should spend money
only to enforce contracts, maintain basic infra-
structure and national security, and protect citi-
zens against criminals.
The literature of the House Republican Con-
ference goes on to illuminate the role of the
government and how tax policies affect individ-
uals: “The money the government spends does
not belong to the government; it belongs to the
taxpayers who earned it. Republicans believe
Americans deserve to keep more of their own
money to save and invest for the future, and
low tax policies help drive a strong and healthy
economy.”
Tax relief is the Republican route to growing
the economy. A Republican government would
reduce taxes for businesses to allow busi-
nesses to grow and thus hire more employees.
In summary, taxes affect many aspects of personal, business, and political deci-
sions. Developing a solid understanding of taxation should allow you to make in-
formed decisions in these areas. Thus, Margaret can take comfort that her semester
will likely prove useful to her personally. Who knows? Depending on her interest in
business, investment, retirement planning, and the like, she may ultimately decide to
pursue a career in taxation.
Republicans also seek to limit income taxes for
individuals so that people can hold on to more
disposable income, which they can then spend,
save, or invest.
Political Ideology: Democrat
The tax policy for the Democratic Party calls for
raising certain taxes to provide money for gov-
ernment spending, which in turn generates
business. The party platform asserts that gov-
ernment spending provides “good jobs and will
help the economy today.”
Many Democrats are adherents to Keynes-
ian economics, or aggregate demand, which
holds that when the government funds pro-
grams, those programs pump new money into
the economy. Keynesians believe that prices
tend to stay relatively stable and therefore any
kind of spending, whether by consumers or the
government, will grow the economy.
Like the Republicans, Democrats believe
the government should subsidize vital services THE KEY FACTS
that keep cities, states, and the country run-
What Qualifies
ning: infrastructure such as road and bridge
as a Tax?
maintenance and repairs for schools. Demo-
• The general purpose of
crats also call for tax cuts for the middle class.
taxes is to fund govern-
But who benefits most under each platform?
ment agencies.
The conventional wisdom is that corporations
• Unlike fines or penalties,
and the wealthy will benefit more with a Repub-
taxes are not meant to
lican tax policy, while small businesses and punish or prevent illegal
middle-class households will benefit from a behavior; but “sin taxes”
Democratic tax policy. are meant to discourage
some behaviors.
Source: http://www.investopedia.com/articles/
economics/09/us-parties-republican-democrat-taxes.asp • The three criteria neces-
sary to be a tax are that
the payment is
• required
• imposed by a
government
• and not tied directly to
the benefit received by
the taxpayer.

WHAT QUALIFIES AS A TAX? LO 1-2

“Taxes are the price we pay for a civilized society.”—Oliver Wendell Holmes Jr.
Taxes have been described in many terms: some positive, some negative, some
printable, some not. Let’s go directly to a formal definition of a tax, which should
prove useful in identifying alternative taxes and discussing alternative tax systems.
A tax is a payment required by a government that is unrelated to any specific ben-
efit or service received from the government. The general purpose of a tax is to fund
the operations of the government (to raise revenue). Taxes differ from fines and
­penalties in that taxes are not intended to punish or prevent illegal behavior. None-
theless, by allowing deductions from income, our federal tax system does encourage
1-4 CHAPTER 1 An Introduction to Tax

TAXES IN THE REAL WORLD Affordable Care Act

The Affordable Care Act requires individuals to
be covered by a health insurance plan or to pay
a tax—which is paid on the individual’s income
tax return. The adult annual dollar amount
phased in as follows: $95 in 2014; $325 in
2015; and $695 in 2016. The Congressional
Budget Office and the Joint Committee on
Taxation jointly estimated that 5.9 million
Americans will be subject to the penalty in 2016
and the provision will raise $6.9 billion in revenue
in that year.
You may recall that one question the Su-
preme Court had to rule on was whether this
provision was a “penalty” or a “tax.” The Su-
preme Court held that the provision is a tax and
answered as follows: “The payment is not so
high that there is really no choice but to buy
health insurance; the payment is not limited to
willful violations, as penalties for unlawful acts
often are; and the payment is collected solely
by the (Internal Revenue Service) through the
normal means of taxation,” Chief Justice John
Roberts wrote in the decision.
Source: National Federation of Independent Business
v. Sebelius, 132 S. Ct. 2566 (2012).

certain behaviors like charitable contributions, retirement savings, and research and
development. Thus, we can view it as discouraging other legal behavior. For example,
sin taxes impose relatively high surcharges on alcohol and tobacco products.2
­Another example is the shared-responsibility payment introduced by the Affordable
Care Act. This payment was declared to be a “tax” by the Supreme Court. The tax is
imposed on those who do not have minimum essential health care coverage.3
Key components of the definition of a tax are that
• the payment is required (it is not voluntary),
• the payment is imposed by a government agency (federal, state, or local), and
• the payment is not tied directly to the benefit received by the taxpayer.
This last point is not to say that taxpayers receive no benefits from the taxes
they pay. They benefit from national defense, a judicial system, law enforcement,
government-sponsored social programs, an interstate highway system, public schools,
and many other government-provided programs and services. The distinction is that
taxes paid are not directly related to any specific benefit received by the taxpayer. For
­example, the price of admission to Yellowstone National Park is a fee rather than a
tax because a specific benefit is received.
Can taxes be assessed for special purposes, such as a 1 percent sales tax for edu-
cation? Yes. Why is an earmarked tax, a tax that is assessed for a specific purpose,
still considered a tax? Because the payment made by the taxpayer does not directly
relate to the specific benefit received by the taxpayer.

Example 1-1
Margaret travels to Birmingham, Alabama, where she rents a hotel room and dines at several
­restaurants. The price she pays for her hotel room and meals includes an additional 2 percent city
surcharge to fund roadway construction in Birmingham. Is this a tax?
Answer: Yes. The payment is required by a local government and does not directly relate to a
­specific benefit that Margaret receives.

2
Sin taxes represent an interesting confluence of incentives. On the one hand, demand for such products
as alcohol, tobacco, and gambling is often relatively inelastic because of their addictive quality. Thus,
taxing such a product can raise substantial revenues. On the other hand, one of the arguments for sin
taxes is frequently the social goal of reducing demand for such products.
3
For details on the computation of the shared responsibility payment see Reg. §1.5000A-4.
 CHAPTER 1 An Introduction to Tax 1-5

Example 1-2
Margaret’s parents, Bill and Mercedes, recently built a house and were assessed $1,000 by their
county government to connect to the county sewer system. Is this a tax?
Answer: No. The assessment was mandatory and it was paid to a local government. However, the
third criterion was not met since the payment directly relates to a specific benefit (sewer service)
received by the payees. For the same reason, tolls, parking meter fees, and annual licensing fees
are also not considered taxes.

HOW TO CALCULATE A TAX LO 1-3

In its simplest form, the amount of tax equals the tax base multiplied by the tax rate:

Eq. 1-1 Tax = Tax Base × Tax Rate

The tax base defines what is actually taxed and is usually expressed in monetary
terms, whereas the tax rate determines the level of taxes imposed on the tax base and THE KEY FACTS
is usually expressed as a percentage. For example, a sales tax rate of 6 percent on a How to Calculate a Tax
purchase of $30 yields a tax of $1.80 ($1.80 = $30 × .06). • Tax = Tax base × Tax rate
Federal, state, and local jurisdictions use a large variety of tax bases to collect • The tax base defines what
tax. Some common tax bases (and related taxes) include taxable income (federal and is actually taxed and is
state income taxes), purchases (sales tax), real estate values (real estate tax), and per- usually expressed in
­monetary terms.
sonal property values (personal property tax).
• The tax rate determines
Different portions of a tax base may be taxed at different rates. A single tax ap-
the level of taxes imposed
plied to an entire base constitutes a flat tax. In the case of graduated taxes, the base on the tax base and is
is divided into a series of monetary amounts, or brackets, and each successive bracket ­usually expressed as a
is taxed at a different (gradually higher or gradually lower) percentage rate. percentage.
Calculating some taxes—income taxes for individuals or corporations, for • Different portions of a
­example—can be quite complex. Advocates of flat taxes argue that the process tax base may be taxed at
different rates.
should be simpler. But as we’ll see throughout the text, most of the difficulty in cal-
culating a tax rests in determining the tax base, not the tax rate. Indeed, there are
only three basic tax rate structures (proportional, progressive, and regressive), and
each can be mastered without much difficulty.

DIFFERENT WAYS TO MEASURE TAX RATES

Before we discuss the alternative tax rate structures, let’s first define three different
tax rates that will be useful in contrasting the different tax rate structures: the mar-
ginal, average, and effective tax rates.
The marginal tax rate is the tax rate that applies to the next additional increment
of a taxpayer’s taxable income (or deductions). Specifically,

Marginal Tax Rate =

¢Tax* (New Total Tax − Old Total Tax)
Eq. 1-2 =
¢Taxable Income (New Taxable Income − Old Taxable Income)
*Δ means change in.

where “old” refers to the current tax and “new” refers to the revised tax after incor-
porating the additional income (or deductions) in question. In graduated income tax
systems, additional income (deductions) can push a taxpayer into a higher (lower)
tax bracket, thus changing the marginal tax rate.
1-6 CHAPTER 1 An Introduction to Tax

Example 1-3
Margaret’s parents, Bill and Mercedes, file a joint tax return. They have $160,000 of taxable income
this year (after all tax deductions). Assuming the following federal tax rate schedule applies, how
much federal income tax will they owe this year?4

2016 Federal Married Filing Jointly Tax Rate Schedule

If taxable
income is over But not over The tax is

$       0 $ 18,550 10% of taxable income

18,550 75,300 $1,855.00 + 15% of taxable income in excess of $18,550
75,300 151,900 $10,367.50 + 25% of taxable income in excess of $75,300
151,900 231,450 $29,517.50 + 28% of taxable income in excess of $151,900
231,450 413,350 $51,791.50 + 33% of taxable income in excess of $231,450
413,350 466,950 $111,818.50 + 35% of taxable income in excess of $413,350
466,950 no limit $130,578.50 + 39.6% of taxable income in excess of $466,950

Answer: Bill and Mercedes will owe $31,785.50 computed as follows:

$31,785.50 = $29,517.50 + 28% ($160,000 − $151,900)

Note that in this graduated tax rate structure, the first $18,550 of taxable income
is taxed at 10 percent, the next $56,750 of taxable income (between $18,550 and
$75,300) is taxed at 15 percent, and the next $76,600 of taxable income (between
$75,300 and $151,900) is taxed at 25 percent. Bill and Mercedes’s last $8,100 of
­taxable income (between $151,900 and $160,000) is taxed at 28 percent.
Many taxpayers incorrectly believe that all their income is taxed at their mar-
ginal rate. This mistake leads people to say, “I don’t want to earn any additional
money because it will put me in a higher tax bracket.” Bill and Mercedes are cur-
rently in the 28 percent marginal tax rate bracket, but notice that not all their income
is taxed at this rate. Their marginal tax rate is 28 percent. This means that small in-
creases in income will be taxed at 28 percent, and small increases in tax deductions
will generate tax savings of 28 percent. If Bill and Mercedes receive a large increase
in income (or in deductions) such that they would change tax rate brackets, we can-
not identify their marginal tax rate by simply identifying their current tax bracket.

Example 1-4
Bill, a well-known economics professor, signs a publishing contract with an $80,000 royalty ad-
vance. Using the rate schedule from Example 1-3, what would Bill and Mercedes’s marginal tax rate
be on this additional $80,000 of taxable income?
Answer: 28.53 percent, computed as follows:

Description Amount Explanation

(1) Taxable income with additional $240,000.00 $80,000 plus $160,000 taxable income
$80,000 of taxable income stated in Example 1-3.
(2) Tax on $240,000 taxable income $ 54,613.00 Using the rate schedule in Example 1-3,
$54,613 = $51,791.50 + 33% ×
($240,000 − $231,450).

4
The tax rate schedules for single, married filing jointly, married filing separately, and head of household
are included inside the back cover of the text.
 CHAPTER 1 An Introduction to Tax 1-7

Description Amount Explanation

(3) Taxable income before additional $160,000.00 Example 1-3.

$80,000 of taxable income
(4) Tax on $160,000 taxable income $ 31,785.50 Example 1-3.
¢Tax
Marginal tax rate on additional 28.53% = [ (2) − (4) ]/[ (1) − (3) ]
¢Taxable income

Note that Bill and Mercedes’s marginal tax rate on the $80,000 increase in taxable income rests
between the 28 percent and 33 percent bracket rates because a portion of the additional income
($231,450 − $160,000 = $71,450) is taxed at 28 percent with the remaining income ($240,000 −
$231,450 = $8,550) taxed at 33 percent.

Example 1-5
Assume now that, instead of receiving a book advance, Bill and Mercedes start a new business
that loses $60,000 this year (it results in $60,000 of additional tax deductions). What would be their
marginal tax rate for these deductions?
Answer: 25.41 percent, computed as follows:

Description Amount Explanation

(1) Taxable income with additional $100,000.00 $160,000 taxable income stated in
$60,000 of tax deductions Example 1-3 less $60,000.
(2) Tax on $100,000 taxable income $ 16,542.50 Using the rate schedule in Example 1-3,
$16,542.50 = $10,367.50 + 25% ×
($100,000 − $75,300).
THE KEY FACTS
(3) Taxable income before additional $160,000.00 Example 1-3.
$60,000 of tax deductions Different Ways to
Measure Tax Rates
(4) Tax on $160,000 taxable income $ 31,785.50 Example 1-3.
• Marginal tax rate
¢Tax • The tax that applies to
Marginal tax rate on additional 25.41% = [ (2) − (4) ]/[ (1) − (3) ]
¢Taxable income next increment of in-
$60,000 of tax deductions
come or deduction.
¢Tax
Bill and Mercedes’s marginal tax rate on $60,000 of additional deductions (25.41 percent) differs • =
¢Taxable income
from their marginal tax rate on $80,000 of additional taxable income (28.53 percent) in these sce- • Useful in tax planning.
narios because the relatively large increase in deductions causes some of their income to be taxed • Average tax rate
in a lower tax rate bracket and the relatively large increase in income caused some of their income
• A taxpayer’s average
to be taxed in a higher tax rate bracket. Taxpayers often will face the same marginal tax rates for level of taxation on each
small changes in income and deductions. dollar of taxable income.
Total tax
• =
Total income
• Useful in budgeting tax
The marginal tax rate is particularly useful in tax planning because it represents expense.
the rate of taxation or savings that would apply to additional taxable income (or tax • Effective tax rate
deductions). In Chapter 3, we discuss basic tax planning strategies that use the mar- • A taxpayer’s average
ginal tax rate. rate of taxation on each
The average tax rate represents a taxpayer’s average level of taxation on each dollar of total income
dollar of taxable income. Specifically, (taxable and nontaxable
income).
Total Tax Total tax
• =
Eq. 1-3 Average Tax Rate = Total income
Taxable Income
• Useful in comparing the
relative tax burdens of
The average tax rate is often used in budgeting tax expense as a portion of income taxpayers.
(what percent of taxable income earned is paid in tax).
1-8 CHAPTER 1 An Introduction to Tax

The effective tax rate represents the taxpayer’s average rate of taxation on each
dollar of total income (sometimes referred to as economic income), including tax-
able and nontaxable income. Specifically,

Total Tax
Eq. 1-4 Effective Tax Rate =
Total Income

Relative to the average tax rate, the effective tax rate provides a better depiction of a
taxpayer’s tax burden because it depicts the taxpayer’s total tax paid as a ratio of the
sum of both taxable and nontaxable income earned.

Example 1-6
Assuming Bill and Mercedes have $160,000 of taxable income and $10,000 of nontaxable income,
what is their average tax rate?
Answer: 19.87 percent, computed as follows:

Description Amount Explanation

(1) Taxable income $160,000.00

(2) Tax on $160,000 taxable income $ 31,785.50 Example 1-3.
Total tax
Average tax rate 19.87% = (2)/(1)
Taxable income

We should not be surprised that Bill and Mercedes’s average tax rate is lower
than their marginal tax rate because, although they are currently in the 28 percent
tax rate bracket, not all of their taxable income is subject to tax at 28 percent. The
first $18,550 of their taxable income is taxed at 10 percent, their next $56,750 is taxed
at 15 percent, their next $76,600 is taxed at 25 percent, and only their last $8,100 of
taxable income is taxed at 28 percent. Thus, their average tax rate is considerably
lower than their marginal tax rate.

Example 1-7
Again, given the same income figures as in Example 1-6 ($160,000 of taxable income and $10,000
of nontaxable income), what is Bill and Mercedes’s effective tax rate?
Answer: 18.70 percent, computed as follows:

Description Amount Explanation

(1) Total income $170,000.00 $160,000 taxable income plus

$10,000 in nontaxable income
(Example 1-6).
(2) Tax on $160,000 taxable income $ 31,785.50 Example 1-3.
Total tax
Effective tax rate 18.70% = (2)/(1)
Total income

Should we be surprised that the effective tax rate is lower than the average tax
rate? No, because except when the taxpayer has more nondeductible expenses (such
as fines or penalties) than nontaxable income (such as tax-exempt interest), the effec-
tive tax rate will be equal to or less than the average tax rate.
 CHAPTER 1 An Introduction to Tax 1-9

TAX RATE STRUCTURES

There are three basic tax rate structures used to determine a tax: proportional, pro-
gressive, and regressive.

Proportional Tax Rate Structure

A proportional tax rate structure, also known as a flat tax, imposes a constant tax
rate throughout the tax base. As the tax base increases, the taxes paid increase pro-
portionally. Because this rate stays the same throughout all levels of the tax base, the
marginal tax rate remains constant and, in fact, equals the average tax rate (see
­Exhibit 1-1). The most common example of a proportional tax is a sales tax, although
Steve Forbes proposed a flat income tax as part of his 1996 and 2000 presidential
campaigns.
To calculate the tax owed for a proportional tax, simply use Equation 1-1 to
multiply the tax base by the tax rate.

Proportional tax = Tax base × Tax rate

EXHIBIT 1-1 Proportional Tax Rate

Total tax
Tax / Tax rates

Marginal tax rate

= Average tax rate

Tax base

Example 1-8
Knowing her dad is a serious Bulldog fan, Margaret buys a $100 sweatshirt in downtown Athens.
The city of Athens imposes a sales tax rate of 7 percent. How much tax does Margaret pay on the
purchase?
Answer: $100 purchase (tax base) × 7% (tax rate) = $7

Progressive Tax Rate Structure

A progressive tax rate structure imposes an increasing marginal tax rate as the tax
base increases. Thus as the tax base increases, both the marginal tax rate and the
taxes paid increase. Common examples of progressive tax rate structures include
­federal and most state income taxes. The tax rate schedule in Example 1-3 is a
­progressive tax rate structure. As illustrated in Exhibit 1-2, the average tax rate in
a progressive tax rate structure will always be less than or equal to the marginal
tax rate.
1-10 CHAPTER 1 An Introduction to Tax

EXHIBIT 1-2 Progressive Tax Rate

Total tax

Tax / Tax rates

Marginal tax rate

Average tax rate

Marginal tax rate

Tax base

Regressive Tax Rate Structure

A regressive tax rate structure imposes a decreasing marginal tax rate as the tax base
increases (see Exhibit 1-3). As the tax base increases, the taxes paid increase, but
the marginal tax rate decreases. Regressive tax rate structures are not common. In
the United States, the Social Security tax and federal and state unemployment taxes
employ a regressive tax rate structure.5
However, some taxes are regressive when viewed in terms of effective tax rates.
For example, a sales tax is a proportional tax by definition, because as taxable pur-
chases increase, the sales tax rate remains constant.6 Nonetheless, when you consider
that the proportion of your total income spent on taxable purchases likely decreases
as your total income increases, you can see the sales tax as a regressive tax.

EXHIBIT 1-3 Regressive Tax Rate

Marginal tax rate

Total tax
Tax / Tax rates

Average tax rate

Marginal tax rate

Tax base

5
Wages subject to the Social Security tax (6.2 percent in 2016) are capped each year ($118,500 in 2016).
Wages in excess of the cap are not subject to the tax. As might be expected, the maximum Social
­Security retirement benefit is capped as a function of the maximum wage base. Likewise, the federal
and state unemployment tax bases and related unemployment benefits are capped.
6
For example, a destitute taxpayer likely spends all he makes on food and other items subject to the
sales tax; thus, all of his income is subject to a sales tax. In contrast, a wealthy taxpayer likely spends
only a small fraction of his income on items subject to sales tax (while saving the rest). Thus, less of
wealthy taxpayers’ total income is subject to the sales tax, which ultimately results in a lower effective
tax rate.
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Trascorsi cinque lustri appena dal Pontificato di Clemente X, il
gravissimo terremoto del 1703 fece cadere un’altra parte ancora del
Colosseo; e si cominciò a sentire il bisogno di decidersi a qualche
cosa, per impedire almeno la totale rovina dell’Anfiteatro. Ne sono
prova i progetti, più o meno lodevoli dal lato archeologico, che si
venivano elaborando, quale quello dell’architetto Carlo Fontana; e
poscia la sistemazione dell’arena e la costruzione delle edicole della
Via Crucis, fatta da Benedetto XIV: cose tutte che dovean
necessariamente portare, onde evitare gravi disgrazie, il
consolidamento delle parti fatiscenti dell’Anfiteatro. Ma nulla si
decideva ancora a tal riguardo, sino a che, minacciando imminente
rovina la parte del recinto verso il Laterano, Pio VII non frappose più
indugio; e non attendendo, saggiamente, all’ostacolo (attuazione del
progetto di Sisto V), fece costruire il colossale sperone, opera
arditissima ed ammirabile.
D’allora in poi i lavori di consolidamento si proseguirono
continuamente. Leone XII consolidò il recinto dal canto del Foro;
Gregorio XVI ricostruì le arcate interne verso il Celio; e finalmente
Pio IX rafforzò la parte che guarda l’Esquilino. Così per la cura dei
Romani Pontefici resterà ai posteri almeno un’imponente reliquia di
quello stupendo monumento.
Ora i Papi, da quarant’anni, non hanno più il dominio di Roma, e
quindi non han potuto più manifestare la loro sollecitudine per la
conservazione dell’Anfiteatro Flavio. Se ancora avessero dominato,
noi forse avremmo veduto l’opera di qualche altro Pontefice
spiegarsi a pro di quel monumento, consolidandone l’ultima ala del
recinto verso il tempio di Venere e Roma (la quale essendo rimasta
troppo isolata, difficilmente potrà resistere ad una forte scossa
tellurica), e ricostruendone i muri della cavea fino al piano del portico
superiore, come già fece Pio IX quanto alla parte che guarda
l’Esquilino.
Troviamo che sulla fine del secolo XV [680] o sul principio del secolo
XVI, nel Colosseo si rappresentavano drammi sacri; e questi ci
vengono ricordati in varî libri, stampati prima e dopo il cinquecento.
In uno spazio piano, che trovasi sopra gli archi delle antiche
scalinate ristretto con un’ala di muro di forma circolare, si costruì una
tribuna a guisa di teatro; ed in essa ogni anno, nel giorno del Venerdì
Santo, rappresentavasi la Passione di Cristo.
Scelti i personaggi atti all’uopo, tanti di numero quanti ne ricorda il
Vangelo, rappresentavano essi ciò che in questo si legge
relativamente alla passione e resurrezione del Salvatore. Sulle
scene v’erano effigiati i varî luoghi della Palestina, come
Gerusalemme, Betania, il Cenacolo, l’orto di Getsemani, le case di
Anna, di Caifa e di Erode, il tempio di Gerusalemme, ecc. Le vette
dei monti Oliveto e Calvario, l’albero al quale s’impiccò Giuda, e
forse il pinnaculum templi erano rappresentati al naturale. Nella
scena del pretorio di Pilato eravi il tribunale, ed un seggio che costò
40 ducati.
Nella parte superiore della tribuna eravi una galleria, la quale, dice
l’Adinolfi [681] «facea mostra all’occorrenza delle nuvole con
angeli [682], quali nubi venivano ad oscurare nella morte del
Redentore».
In quella stessa galleria v’era la musica, il coro dei Profeti, quello
delle Sibille, nonchè dei pastori e dei re [683]. I fratelli della
Compagnia del Gonfalone offrivano volentieri la loro opera, onde
costruire i palchi e provvedere il necessario per il buon esito della
rappresentazione; e poichè fra loro v’erano abili pittori, architetti,
letterati e mimi, ciascun di essi concorreva col suo lavoro personale:
così uno dirigeva la costruzione dei palchi, un altro dipingeva le
scene; chi componeva i drammi, e chi li recitava. Fra i pittori si
ricordano: Iacobello di Antonazzo, Savo, Antonio da Tivoli e Maestro
Francesco. Uno dei più valenti compositori di drammi fu Giuliano
Dati, fiorentino; e fra gli attori o coloro che nel 1500 recitarono nel
Colosseo i suddetti drammi, si conserva memoria di Gregorio
orefice, Mazzagattone, Mercurio, Tommaso cartaro [684], Pietro
cartaro, Tommaso libraro, Marcantonio di Caravaggio, Michelangelo
linaiuolo, il fattore della Compagnia ser Agnolo, Mariotto a S.
Pantaleo, Nardino e Marcello, il quale fece la parte di Erode.
Turba immensa di popolo accorreva in quella circostanza al
Colosseo; e Pietro Felino Martire, il Panciroli ed altri scrittori ci
asseriscono che la quantità di gente uguagliava la quantità degli
spettatori dei ludi profani che vi si celebrarono ai tempi degli
Imperatori.
Nella biblioteca domestica del marchese Alessandro Capponi il
Marangoni [685] vide due esemplari di un opuscolo il quale aveva per
titolo: Rappresentazione della Passione del N. S. Jesu Chiesto, la
quale si rappresenta il Venerdì Santo nel Coliseo di Roma,
nuovamente colle figure ristampata. Questo opuscolo consisteva in
un componimento poetico in ottava rima; lo stile ne era rozzo e
volgare; gli atti erano intermezzati da arie, che certamente venivano
cantate. In ambedue gli esemplari, posseduti dal marchese Capponi,
manca l’indicazione del luogo, dell’anno e della tipografia in cui
vennero stampati. Nondimeno, noi, dai tipi, dal frontespizio e dalla
figura di un angelo che in questo è effigiato, possiamo
ragionevolmente dedurre che siano stati stampati a Firenze verso il
1550.
Altri drammi furono scritti dal lodato Giuliano Dati, da Bernardo di
maestro Antonio Romano e da Mariano Particoppe. Nell’archivio
della Compagnia del Gonfalone se ne conservano tuttora due copie.
La prima incomincia: «Contempla la passion del Salvator, ecc.»; e
termina con quest’avvertenza: «Seguita poi la Madonna, colla
deposizione della croce, la musica di Joseph e Nicodemo, e la
musica delle Marie».
La seconda copia è del 1531, e principia: «Quel glorioso Iddio,
ecc.».
Poichè descrivemmo i varî ludi celebrati nell’Anfiteatro Flavio ai
tempi dell’Impero, e parlammo della caccia dei tori ivi stesso
eseguita nel 1332; ci sia pur lecito di dare una notizia sommaria
degli attori e delle attrici, nonchè di fare un sunto del più antico
dramma sacro, conservato nell’archivio del Gonfalone; dramma che
darà al lettore, ne son certo, un’idea chiara del modo con cui si
rappresentava nel Colosseo la Passione di Cristo nei secoli XV e
XVI.
I principali attori di questo storico dramma erano:
1. Il Redentore; 2. la Vergine sua Madre; 3. S. Giuseppe; 4. i ss.
Padri; 5. gli Apostoli; 6. Simone che invita a cena il Messia; 7. la
Maddalena; 8. le tre Marie; 9. la Veronica; 10. Giuda; 11. il Capo de’
Farisei; 12. Caifa; 13. Erode [686]; 14. un Cavaliere con elmo e
corazza; 15. i due Ladroni; 16. Lucifero e Satana.
Gli attori secondarî erano:
1. La Vedova di Naim col suo figliuolo difunto; 2. lo Spiritato (sic)
condotto da alcuni Pontefici; 3. i Farisei coi loro ministri; 4. un uomo
portante un vaso con acqua; 5. gli Angeli; 6. le due ancillae che
tentarono Pietro; 7. un individuo rappresentante la Morte, la quale
dovrà poi avvicinarsi all’albero donde penderà Giuda; 8. lo storpio; 9.
l’adultera; 10. varie Vedove; 11. il Cieco nato; 12. la Cananea; 13.
Nicodemo; 14. Giuseppe, amico di Cristo; 15. Beniamino, nemico del
Messia; 16. Dottori Ebrei; 17. Farfariello (sic); 18. varî Discepoli; 19.
Barabba; 20. il Centurione; 21. il Cirineo; 22. Longino; 23. Giuseppe
d’Arimatea.
Non appena gli attori eran pronti per l’esecuzione del dramma, un
addetto tirava il tendone, e migliaia di occhi erano fisi allo scenario.
Il dramma che siamo per brevemente riportare, trovasi, come
dicemmo, nell’archivio del Gonfalone: esso è intiero, in versi, e
consta di sette atti.
Esce per primo il solito nunzio, il quale esordisce ricordando
compendiosamente le principali gesta di Cristo, durante gli ultimi tre
anni della sua vita mortale. Dopo il prologo incomincia il

ATTO PRIMO
Apparisce l’anima (!) di S. Giuseppe, la quale esorta gli spettatori ad
ascoltare attentamente quanto si è per dire nel dramma; e conchiude
dicendo che ella in quello stesso momento discende al limbo, onde
annunziare ai ss. Padri la venuta del Messia e quindi l’imminente
loro redenzione.
Ciò detto, muta scena. Appare il limbo: i ss. Padri se ne stanno
tranquillamente aspettando Gesù. Dopo un momento questi viene;
ed appena i ss. Padri lo veggono, festosi e giulivi intonano ad alta
voce il Te Deum.
Lucifero, Satana ed altri spiriti infernali, all’udire il canto di quell’inno,
escono precipitosamente dall’inferno..... I primi (Satana e Lucifero)
ragionano fra loro, e discutono sul modo migliore d’impedire l’opera
redentrice........ La discussione è breve, e tosto credono d’avere
trovato il mezzo..... Risolvono di seguir Cristo al deserto..... Vi si
portano effettivamente, e, trovatolo orando, lo tentano, gli offrono
pane e lo menano sulla sommità del tempio. Coll’infelice esito di tutti
gli inutili sforzi infernali, finisce il primo atto [687].

ATTO SECONDO

In quell’atto il Redentore richiama a vita il figlio della vedova di Naim.

Il miracolo giunge a cognizione di Simone, il quale si fa un dovere
d’invitar Cristo alla sua mensa. Quivi la Maddalena unge i piedi del
Messia: e Giuda vien preso da ira e sdegno per il balsamo che
quella adopera. I Farisei risanno, a lor volta, la guarigione
dell’ossesso fatta da Cristo, e lo tentano colla famosa domanda
relativa al tributo di Cesare: il Redentore li confonde con sagge
risposte: torna poi dalla sua Madre; e coll’ordine che dà ai suoi
discepoli di preparare l’ultima cena si dà fine all’atto secondo.

ATTO TERZO
Torna in iscena Giuda, il quale spiega il suo odio contro Cristo: mette
in esecuzione il suo tradimento: va alla casa di Caifa, onde accusare
il suo Maestro presso quel Pontefice: un servo ne porge avviso a
Caifa. Giuda entra nell’appartamento del Pontefice, e dice:

«Padri coscritti, Scribi e Signori,

So ben che tutti siate di buona mente;
Aver seguito Cristo assai mi duole,
Prestando troppa fede a’ sue parole».

Ciò detto, il traditore contratta col Capo dei Farisei la somma da

sborsarsi per la consegna della persona di Cristo: stabilisce la
maniera onde portare ad esecuzione il suo tradimento, e col mettersi
che egli fa in tasca i trenta danari, si chiude il terzo atto.

ATTO QUARTO

Giuda, seguito dai Farisei, va in traccia di Cristo. Partiti questi,

apparisce nuovamente il Redentore coi suoi discepoli; e, dopo un
istante, la sua madre Maria. Gesù domanda ad Essa la benedizione,
e le soggiunge che «da Lei convien si parta». A queste parole, la
Madonna tramortisce dal dolore; e le tre Marie intonano il canto
flebile che incomincia:

«Alta Regina del celeste regno» [688].

Finito questo canto, Maria ricupera i sensi; torna a parlare col Figlio,
il quale la benedice e se ne parte; e le tre Marie intonan di nuovo
l’inno.
In questo punto l’atto cambia scena.
Si presenta la sala del Cenacolo: v’entra Cristo coi suoi discepoli:
celebra l’ultima cena, dirigendo la sua parola ora a Pietro ora a
Giuda. Poscia lava i piedi agli Apostoli: torna alla mensa: comunica i
discepoli; e, dopo aver rese le dovute grazie all’Eterno Padre per la
Pasqua celebrata, prende seco Pietro, Giacomo e Giovanni, e si
dirige all’orto di Getsemani. Ivi si svolge quanto leggesi nel Vangelo,
e l’atto termina colle parole del Maestro:

«Pietro, nella vagina riponi il coltello;

Chè chi di quel ferisce è a Dio rubello».

ATTO QUINTO

Cristo trovasi nella casa del Pontefice Anna, il quale si fa a parlare:

«Rispondi un poco a me, predicatore:

Con qual dottrina al popol hai insegnato?»

Cristo risponde:

«Predicato ho in palese, e ognun ha udito:

E lor ti sapran dir s’io t’ho fallito».

Non appena pronunziate queste parole, un ministro del Pontefice dà

uno schiaffo al predicatore della nuova dottrina.
Frattanto Pietro, interrogato dalle ancillae, nega e rinnega di
conoscere il suo Maestro: il gallo canta: finalmente Pietro si ravvede,
e principia un soliloquio. — Un momento dopo ricambia la scena.
Cristo vien condotto da Caifa, dalla casa di Caifa, al Pretorio di
Pilato; dal pretorio vien presentato ad Erode, nella cui abitazione si
dà principio al

ATTO SESTO

Cristo vien ora accusato e considerato qual seduttore. Il Re gli dirige

la parola, ma quegli tace. Allora Erode s’adira; lo fa vestire di bianco,
e trattandolo da pazzo, lo rinvia a Pilato. — Vedendo gli Ebrei che
quest’ultimo rimaneva perplesso e non avea coraggio di
condannarlo, schiamazzando dicono:

«Exaudi Pontio Pilato nostre voci,

Chè costui merta più di mille croci».

A queste parole Pilato si determina di interrogare il popolo se prima

della Pasqua vogliono liberare Cristo o Barabba. I Farisei
domandano la vita di quest’ultimo. Pilato chiama il Cavaliere, e gli
ordina di flagellare Gesù. Il cavaliere compie il mandato; poi
s’inginocchia innanzi a Cristo, e gli dice: «O re dei Giudei»: dopo ciò
il capo di Gesù vien coronato di spine, e l’afflitto Signore esclama:

«Popolo che di spine m’hai coronato, ecc.»

Dopo ciò viene nuovamente menato innanzi a Pilato, il quale,

vedendolo così maltrattato, lo presenta ai Farisei, dice loro: «Perchè
volete crucifiggere il vostro re?» I Farisei, maggiormente sdegnati,
domandano la morte di Cristo. Pilato si lava le mani, e gli Ebrei
gridando dicono:

«Venga, Signor, su’ sangue ed aspri doli

Sopra di noi ed i nostri figliuoli!»

Giuda, dal suo canto, se ne sta triste tra i Farisei: prevede la

condanna dell’innocente: proferisce parole di pentimento: restituisce
i trenta danari, i quali vengono riposti in corbonam: narra le gesta
della sua vita fino a che divenne discepolo di Cristo: chiama la
Morte: questa non viene: apparisce invece la Vita, la quale gli
favella. Ma Giuda non l’ascolta, dispera e torna a chiamar la Morte.
Questa viene, e si dà principio un dialogo fra essa e Giuda: dialogo
che si prosegue fino all’impiccagione del traditore. Dopo questo i
Farisei dicono a Pilato che se non condanna Gesù sovverte la
giustizia. Allora Pilato, vinto dal timore, fa pubblicare la seguente
SENTENZA:
«Noi Pontio Pilato per volontà delli immortali idii e delli romani
principi e della senatoria autorità, presidente generale di tutta la
Judea costituito, desiderando noi la predicta provincia sotto nostra
fede et diligentia assegnata, quella di mali e perversi homini purgare:
come allo dovere di un grave judice se conviene: et con ogni forza et
industria servendo al suddetto popol romano: et volendo alla
perpetua quiete e pace provvedere: essendo menato dinanzi [689] al
nostro cospetto Jesu Nazareno e trovandolo uomo seditioso e
seduttore, il quale [690] fino al presente confidandosi nella sua
temerità: habbia havuto ardire contro il dovere e le imperiali [691]
leggi attribuirsi il regnio de’ Judei con denegare il tributo al grande
imperatore Cesare Augusto: sedendo adunque per tribunale per
questa nostra sententia Jesu Nazareno qui presente come uomo
seduttore, factioso [692] et delli buoni [693] costumi et vita e pace
insidiatore, giudichiamo [694] et sententiamo esser degno di morte; et
acciocchè per suo esempio li altri per avvenire [695] non ardiscano nè
presumano far contra le imperiali leggi, et considerando [696] che
quelli che vergognosamente [697] et con seditioni et factioni
vergognosamente debbano essere puniti: pertanto adunque [698] se
ne commette ad voi cavalier di nostra corte che detto Jesu Nazareno
come uomo quasi di ladroni et factiosi [699] auctore et principe allo
loco solito dello monte calvario menar dobbiate [700] et li tanto in la
croce affiso in mezzo a doi ladroni tanto star debba in fin che l’anima
dal suo corpo si separi, ad esempio di ogni et qualunque altro
seditioso e malfattore contra alle [701] leggi imperiali».
Pubblicata la sentenza, i Farisei ne domandano al Cavaliere
l’immediata esecuzione. Cristo vien caricato della croce: intraprende
il doloroso viaggio: s’imbatte nella Veronica, la quale gli porge un
panno e gli domanda perdono: nel panno resta impressa una figura,
che essa mostrandola al popolo, dice essere la figura del volto di
Cristo. Giunto al Calvario, il Redentore si rivolge al Padre, e lo prega
ad accettare il sacrifizio della sua vita: si distende sulla croce, e così
si chiude il sesto atto.
 ATTO SETTIMO

Apparisce l’evangelista Giovanni, il quale, afflitto per la prossima

morte del maestro, esclama:

«Ohimè, che gli occhi suoi hanno velato, ecc.»

Sopravviene la Madonna, e di fronte a quello spettacolo si sviene. Il

Cavaliere ordina di alzare la croce; ed il popolo riunito nell’Anfiteatro
grida: «Misericordia ecc.». Il Capo de’ Farisei dice: «Eccovi
crocifisso il malfattore»: le vesti di Cristo vengono sorteggiate: il
Crocifisso prega per i suoi crocifissori. Sulla croce si pone il titolo:

«I . N . R . I»

e i Farisei ripetono a Pilato che il loro re è Cesare Augusto, e non

Cristo: Pilato risponde:

«Ciò che scrissi voglio che sia scritto,

Nè vo’ tornare indietro il (col) mio ditto».

Torna la Madonna, la quale dice al Cavaliere:

«O saggio cavalier, in cortesia, ecc.»

ma questo, adirato, risponde:

«Donna, se vuoi onor, non ti accostare, ecc.»;

il Cavaliere se ne parte, e Maria rimane a’ piè della Croce.

Incomincia allora il noto colloquio fra i due ladroni; finito il quale le
Marie intonano il flebile canto:

«Maestro caro, vedove ci lasci, ecc.»

La Madonna dice al Figlio:

 «Ad un ladron non hai prima parlato, ecc.»

Egli risponde:

«Donna, veggiomi già condotto a morte, ecc.»

E S. Giovanni segue:

«Signor, farò quanto m’hai comandato, ecc.»

Il Crocifisso dice: «Sitio Pater». Il Cavaliere gli nega la bevanda: poi

muta consiglio e gli porge aceto e fiele. Cristo lo saporeggia e dice:
«Consumatum est».
I Farisei lo dileggiano, lo dicono falso e rio, ecc. La Madonna si
lagna colle turbe: Cristo ad alta voce esclama: «Eloi eloi lagma
sabactani». I Farisei credono che Ei chiami Elia, e seguono a
dileggiarlo. Finalmente, giunto il momento di morire, Cristo si fa a
dire:

«Altissimo mio Padre, onnipossente, ecc.»

Compariscono gli Angeli, i quali dicono reverentemente:

«Ecce Agnus Dei».

Longino canta:

«O cieca gente, o popolo perverso, ecc.

Misericordia, o sommo Creatore».

Segue la deposizione di Cristo dalla croce «con la musica di

Giuseppe di Arimatea, di Nicodemo e delle Marie».

Fin qui il dramma. Non è nostro compito esaminarlo criticamente.

Molte cose dovremmo osservare. Solamente coll’Adinolfi [702]
diremo: «Il dramma non è tutto da lodare o degno di biasimo, ma
ben poco da mettere in paragone delle antiche, semplici e maestose
rappresentazioni anfiteatrali alle quali serviva tutta quanta la natura
della costruzione dell’edificio, e che secondo la costumanza discesa
dal greco teatro aveano nell’arenario le scene fisse ed in pieno, e
non dipinte sulla tela, e ciò sia detto rispetto alla forma esteriore
della tragedia o rappresentazione, che non recava noia alcuna con
la lunga partizione degli atti, compatibile solamente nella storica
tragedia, contenente talvolta l’intiera vita di un personaggio».
Le spese che importavano simili rappresentazioni, variavano
secondo la maggiore o minore grandiosità degli scenari, palchi ecc.,
e la magnificenza nell’esecuzione. Nè mancarono persone pie le
quali offrissero talvolta denaro a questo scopo; e nel libro
Decretorum [703], leggiamo: «che si faccia la devozione della
Passione nel Colosseo, essendo persona che per esse offerisce 60
ducati, acciò non si perda la detta devozione».
Il dramma da noi compendiato e già esposto, fu recitato
nell’Anfiteatro Flavio fino al 1522. Il 23 Marzo dello stesso anno i
fratelli della Compagnia ne sospesero l’esecuzione, pubblicando il
seguente decreto:
«Non si faccia, conforme era solito, la rappresentazione della
Passione nel Colosseo, attento periculo ob delationem armorum,
cum esset difficile sine scandalo transire posse» [704].
A me sembra di vedere la causa di questo decreto nello stato
turbolento in cui trovavasi Roma in quell’anno; giorni orribili, in cui la
brutalità, i furti e gli omicidi dei soldati Còrsi, come pure la lotta di
Renzo di Ceri coll’esercito dei Fiorentini e dei Sanesi, obbligavano i
Romani a star continuamente in armi.
(In questo stesso tempo accadde un fatto, che non posso tralasciar
di riferire, perchè avvenuto nel Colosseo. Un tal Demetrio greco
percorse le vie della città con un toro da lui ammansito, come egli
diceva, con arti magiche; e lo condusse al Colosseo per ivi
sacrificarlo secondo il rito antico e a fine di placare i demoni
avversi!) [705].
Nell’anno 1525 il surriferito decreto fu annullato, e si ordinò che si
ripristinassero le rappresentazioni [706]: «Fu proposto che per fare la
rappresentazione del Colosseo, secondo il disegno fatto, vi
sarebbero occorsi di spesa almeno 250 ducati; e fu risoluto che per
essere l’Anno Santo si faccia con ogni onorificenza».
Il 30 Luglio dell’anno 1525 fu stabilito che le sopraddette
«rappresentazioni avessero luogo di quattro in quattro anni, onde
evitare spese gravi» [707].
Nel 1531 si pensò a restaurare il palco, rimasto danneggiato nel
sacco di Roma (a. 1527); e si stabilì che annualmente si
spendessero 20 ducati allo scopo di «conservarlo e risarcirlo» [708].
Nel 1539 nel Colosseo ebbe nuovamente luogo la rappresentazione
della Passione [709]; ma nel seguente anno (1540) cessò
probabilmente quell’uso. Gli scrittori medioevali ed il Panciroli ci
dicono infatti che quei drammi furono aboliti dal Pontefice Paolo III, il
quale, malgrado tutte le pratiche fatte dal popolo onde perpetuare
quella devozione, ne negò il permesso [710].
Leggiamo nel libro Decretorum della Compagnia del Gonfalone:
«Anno 1517, che si faccia la cappella nel Colosseo e vi si spendano
30 ducati di oro di Camera» [711]. Questa deliberazione fu presa
dietro il consenso di Raffaele De’ Casali e di Luigi De’ Mattuzzi,
guardiani dell’Ospedale del Salvatore. Il progetto però non si eseguì
che nel 1519. Nello stesso libro Decretorum [712] si legge: «1519, 6
Febbr. Che si faccia la cappella nel Colosseo». Allora i guardiani
dell’Ospedale del Salvatore rinnovarono il loro consenso, e
permisero alla Compagnia del Salvatore di poter cavare qualche
pietra di travertino per fare alcuni cunei e porte della stessa cappella,
e questo fu il sacello detto di S. Maria della Pietà.
Come risulta dalle date, la cappella venne fatta quando ancora nel
Colosseo si eseguivano le rappresentazioni della Passione del
Salvatore; poichè una di queste ve ne fu, come già dicemmo, nel
1519 [713], e non cessarono che nel 1540.
Cessati i sacri drammi nell’Anfiteatro, il palco scenico rimase
abbandonato, come pure abbandonato dovè rimanere l’intero
edificio; giacchè, non molti anni dopo, si giunse a tal eccesso da
farlo divenire campo di stregonerie notturne; ed il Cellini racconta
nella sua vita che una notte egli stesso vi assistette.
La cappella della Pietà cadde pur essa in oblio, e vi rimase per
settanta anni circa: fino a che, nel 1622, l’Arciconfraternita del
Gonfalone risolvè ripararla e ridonarla al culto. Vi aggiunse essa
alcune stanze per un custode, e nell’alto del piccolo edificio collocò
una campana. La chiesuola fu consacrata da Mons. Giulio
Sansedonio, già vescovo di Grosseto [714]. A memoria del restauro,
si pose la seguente iscrizione:

ARCHICONFRATERNITAS GONFALONIS
SACELLVM . HOC . IN . COLISEO . POSITVM . SVB
INVOCATIONE . BEATAE . MARIAE . PIETATIS
VETVSTATE . DIRVTVM . ET . COLLABENS . NE
TANTA . PIETAS. OBLIVIONI . TRADERETVR . IN
MELIOREM . FORMAM . RESTITVI . ATQVE . OR-
NARI . MANDAVIT . A . D . MDCXXII . PET . DONA-
TO . CAESIO . CVRTIO . SERGARDIO . MARIO
Q . AVRELII . MATTAEI . MAXIMO . Q . HORATII
MAXIMI . CVSTODIBVS . ET . M . ANT . PORTA
CAMERARIO .

Nell’opera del Fontana [715] sul Colosseo vi è una veduta dell’interno

dell’Anfiteatro qual’era agl’inizi del secolo XVIII. In essa si vede la
cappella suddetta col suo piccolo campanile e l’abitazione del
custode; dinanzi alla porta si scorge eretta una croce.
Questa interessante veduta ci fa conoscere il sito preciso ove
sorgeva la cappella di S. Maria della Pietà: essa sorgeva presso la
porta libitinense, ricavata nei vani sotto la gradinata del podio, ed
ove si dispiegava il palco delle rappresentazioni della Passione,
della quale si distinguono gli avanzi. Ma poichè la cappella
rappresentata in quella veduta supera il piano del palco scenico, e
non potendosi ammettere che quello sconcio sia stato fatto all’epoca
delle rappresentazioni, dovrà dedursi che le stanze (delle quali si
veggono due finestre sulla porta del sacello) siano state aggiunte nel
restauro del 1622, e che prima del restauro la cappella fosse
intieramente sotto il palco delle rappresentazioni.
Il ch. Armellini dice che la cappella di S. Maria della Pietà servì
anteriormente da guardaroba della Compagnia che rappresentava la
passione di N. S. Gesù Cristo. L’Adinolfi opina che il sacello della
Pietà fosse la chiesuola di S. Salvatore de Rota Colisaei. A me
sembra che ambedue abbiano ragione, e che un’opinione non
escluda l’altra. L’Adinolfi fa derivare la denominazione Rota Colisaei
dall’arena dell’Anfiteatro; l’Armellini dalla vasca rotonda della Mèta
Sudante. Più giusta tuttavia sembra essere l’opinione dell’Adinolfi,
poichè presso la Mèta Sudante v’era una chiesa dedicata a Maria
SS. detta De Metrio: denominazione che lo stesso Armellini giudica
«una corruttela della parola de Meta». Laonde farebbe mestieri
ammettere che la Mèta Sudante fosse chiamata
contemporaneamente con due nomi: cosa non facile a dimostrarsi.
Che per Rota Colisaei s’intendesse invece l’arena, mi pare potersi
dedurre da quel che si legge nel Catasto dei beni della Compagnia
del Salvatore [716]. Troviamo infatti che nella Ruota del Coliseo, poco
lungi dalla chiesa di S. Salvatore, eravi una grotta, detta anche casa,
forno e luogo da conservare erbe secche. Ora, attorno all’arena si
può assai bene trovare il posto per questa grotta; ma attorno alla
vasca della Mèta Sudante no davvero!
Che poi su questa chiesina si fosse potuto stendere il palco scenico,
e far divenire essa stessa la guardaroba della Compagnia, si può
argomentare dal fatto dell’abbandono in cui cadde il detto sacello nel
periodo che córse fra il pontificato di Pio II e quello d’Innocenzo VIII;
abbandono reso manifesto dal decreto di Pio II, col quale egli
toglieva le rendite alla chiesuola di S. Salvatore de Rota Colisei e le
donava a S. Eustachio.
Nè fa ostacolo la diversità del titolo della cappella, detta prima di S.
Salvatore e poi di S. Maria della Pietà, giacchè questa diversità è più
apparente che reale.
La cappella fu sempre dedicata al Salvatore: probabilmente nella
sua primitiva erezione (perchè più conveniente all’epoca — che io
ritengo antichissima — come ora procurerò di dimostrare) vi si
dipinse il Salvatore crocifisso con la Vergine a piè della croce.
Questa pietosa scena potè benissimo essere rappresentata tra il VI
ed il VII secolo, e a quei tempi faccio io risalire l’origine di quella
cappella. Nè mancano esempî, ed uno ne abbiamo d’epoca più
antica ancora, nella scatola d’avorio, cioè, che si custodisce nel
Museo britannico, e che, come dice il Kaufmann, ragionevolmente
possiamo dire opera del secolo V. Nei restauri posteriori vi si potè
esprimere la morte del Salvatore ed il tenero dolore della Vergine più
pietosamente ancora, dipingendovi, cioè, il corpo del Salvatore
deposto dalla croce e giacente sulle ginocchia della sua SS. Madre:
gruppo chiamato per antonomasia la pietà. Poste queste
considerazioni, le due denominazioni si fondono in una. Non mi pare
fuor di proposito ricordare qui quanto scrisse il Martinelli nella sua
Roma ex etnica sacra [717]: «S. Salvatoris de Pietate in Campo
Martio intra monasterium S. Mariae. Antiqua Urbis mirabilia referunt
hic fuisse imaginem Salvatoris quae dicebatur Pietas».
Alcuni vogliono che detta cappella si fosse appellata pur anche S.
Maria de Stara. Basano il loro asserto sul Registro dei possedimenti
della Basilica Lateranense [718], nel quale è menzionata la chiesuola
con questo nome. Io congetturo che questa denominazione non sia
altro che una piccola variante del titolo della cappella, chiamandola,
cioè, «S. Maria de Salvatore;» e che trovandosi questo secondo
nome scritto abbreviato «S. Maria de Store» (e forse malamente
scritto), abbia potuto originarsi il titolo di S. Maria de Stara.
Comunque sia è certo che l’origine di questo sacello eretto
nell’interno dell’Anfiteatro Flavio dovè essere antichissima. Prima
che il papa Giovanni XXII istituisse l’Arciconfraternita del Salvatore,
detta di Sancta Sanctorum (a. 1332), quella cappella già esisteva. È
ricordata durante il pontificato di Bonifacio VIII (1294-1303) nel
registro dei possedimenti della Basilica Lateranense; ed un secolo
innanzi (1192) la troviamo nominata nel libro «De Censibus» di
Cencio Camerario: «S. Salvatori de Rota Colisei VI den».
Io non conosco dati più antichi: forse ricerche accurate potrebbero
somministrarli. Tuttavia, l’esser certo che l’arena dell’Anfiteatro
Flavio, fu bagnata dal sangue dei Martiri [719], e lo esistere un
cimitero cristiano addossato all’Anfiteatro fra il VI e il VII secolo,
appunto in quella parte ove internamente sorgeva la cappella del
Salvatore; ed il veder questa cappella ricavata in uno dei fornici del
piano terreno presso l’arena, e quindi allo stesso livello del cimitero
suddetto, (livello che nell’alto medio evo andò gradatamente
sollevandosi, come risultò dagli scavi del 1895) [720]; ed il trovarla
finalmente registrata tra i possedimenti dell’Arcibasilica Papale, tutto
ciò mi fa ragionevolmente opinare che, cessati del tutto i ludi fra il VI
ed il VII secolo, presso l’arena del Flavio Anfiteatro, in prossimità
della porta libitinense, donde uscirono trionfanti le spoglie
insanguinate dei Martiri, si dedicasse un sacello al Re dei Martiri. E
questo fu probabilmente il nucleo del cimitero, la cui necessaria
esistenza fu giustamente accennata dal ch. P. Grisar [721].
Nella sua primitiva origine, probabilmente s’accedeva alla cappella
dalla parte del cimitero e non dell’arena, perchè a quei tempi il muro
del podio non poteva essere ancora distrutto; più tardi vi si accedette
dalla parte interna: e questo fino a che rimase in essere il palco delle
rappresentazioni della Passione, sotto il quale trovavasi la cappella.
La porta perciò, che vediamo nella tavola del Fontana, e che dà
sull’arena, fu aperta nel restauro del 1622; e ciò vien confermato nel
permesso, dato dai guardiani dell’Arciconfraternita del Salvatore, di
poter cavare qualche travertino per far cunei e per le porte.
Lo studio di questa cappella, che può dirsi il centro della sacra zona
formata dalle chiese che attorniarono l’Anfiteatro Flavio, ci ha
condotto a riconoscere, con grandissima probabilità, la massima
antichità possibile della venerazione verso quel luogo consacrato dal
sangue dei martiri; venerazione che i moderni ipercritici [722]
vorrebbero far credere un parto del pietoso zelo di Clemente X e di
Benedetto XIV. Almeno dicessero col Grisar [723]: «Furono i secoli
decimo settimo e decimo ottavo che per primi (?) cercarono di
avvivare il ricordo dei martiri della fede cristiana fra queste solenni
ruine!»
Fuori dell’Anfiteatro, dalla parte che guarda verso la via dei Santi
Quattro, vi era una piazza chiamata di S. Giacomo, a causa di una
chiesa ivi prossima dedicata a questo santo: «S. Giacomo de
Coloseo». Ecco le parole colle quali il Mellini [724] tratta di questo
sacello: «Vicino al Colosseo si vede un fenile il quale era prima la
chiesa di S. Giacomo detta de Colosseo profanata quasi ai nostri
giorni. A questa chiesa la vigilia dell’Assunta s’incontravano il clero
lateranense e gli ufficiali del popolo romano, e quivi si risolveva il
modo di fare la processione dell’immagine del Salvatore....» Era
adorna di pitture, che furono copiate da Ferdinando Baudard e poi
dal Guattani. Fra quelle v’era una figura colossale di S. Giacomo
apostolo sedente, col bordone e un libro nelle mani [725].
Ivi sorgeva eziandio la casa dei Frangipani, la quale poi venne in
dominio degli Annibaldi. Relativamente alle case degli Annibaldi de
Coliseo, che dalla piazza di S. Giacomo corrispondevano entro
l’Anfiteatro Flavio, ci rimangono le seguenti notizie:
Nel 1365 l’ospedale del Ss.mo Salvatore comperò per trenta ducati
la metà di una casa appartenente a Cola di Cecco di Giovanni
Annibaldi. «Questa casa, dice l’Adinolfi [726], era o per se sola
congiunta all’Anfiteatro Flavio, o con altri suoi membri entrava perfin
nel medesimo, giacchè contenendo delle sale e delle camere,
allorquando Giovanni di Branca e Mario Sebastiani, guardiani della
Compagnia del Gonfalone ebbero ottenuto da Innocenzo Papa VIII
la licenza di poter rappresentare entro il Colosseo la sacra ed
istorica tragedia della passione di nostro Signore, addimandarono
questa casa alli guardiani dello spedale suddetto Ludovico de’
Margani ed Alto de Nigris, e assentendo anche i conservatori di
Roma per questo unico e devoto fine glie la concedettero».
Nel 1462 la parte della casa che guardava la piazza di S. Giacomo,
era diruta; la parte invece che internavasi nel Colosseo, era ancora
in buono stato di conservazione [727].
La suddetta chiesa di S. Giacomo de Coliseo profanata e ridotta a
fienile, come dice il Mellini e come pur si ricava dal Martinelli [728], il
quale scrive: S. Iacobi apud Colosseum erat ibi ubi est foenile cum
imagine B. Mariae V. in eius angulo; habebatque hospitale, quod ad
Lateranum traslatum est, et nunc dicitur ad Sancta Santorum, venne
finalmente abbattuta nel 1815.
Il Marangoni [729] aggiunge che l’amministrazione e la cura di questa
chiesa e di questo ospedale l’ebbe l’Arciconfraternita de’
Raccomandati del Ssmo Salvatore ad Sancta Sanctorum fino
all’anno 1470. Lo deduce dagli statuti rinnovati in quell’anno e
confermati nel 1513, nei quali i guardiani dell’Arciconfraternita
s’obbligavano, sub juramento, di visitare una o due volte alla
settimana quell’ospedale. Lo stesso autore [730] assicura di aver
letto, ma non ricorda dove, che l’ospedale trovavasi negli archi
superiori dell’Anfiteatro, già chiusi dai Frangipani. «In effetto, dice,
tutti i sei archi chiusi della elevazione esteriore, sono anche murati al
di dentro fra i pilastri del secondo portico, sicchè formansi e si
dividono due lunghi corridoi quanti portano i sei archi, luogo
attissimo per l’ospedale».
Il celebre letterato Francesco Valesio, senza però accennare alle
fonti, comunicò ad alcuni suoi amici che nei suddetti archi chiusi del
Colosseo vi era anticamente un monastero di monache [731].
Questo stesso asserisce il Bonet. Noi riportiamo la notizia soltanto in
ossequio alla ch. memoria del suddetto Valesio, ma siamo affatto
incerti della verità di essa.
L’Adinolfi [732] combatte energicamente queste opinioni. «È
veramente triviale (dice), e non pertanto meno curiosa l’opinione del
Marangoni, che la Società del Salvatore avesse governo non pur di
questo tempietto ma eziandio dello spedale che li era ammesso fra
gli archi stessi del Colosseo, il quale spedale dopo molti anni fusse
trasportato al Laterano ove esiste; e dell’istessa natura è quella di
Francesco Valesio quando pretende nell’Anfiteatro Flavio
anticamente venisse aperto un monastero di monache.
Rincrescendomi d’involgermi in certe quistioni tra perchè la brevità
del lavoro le rifiuta, e perchè si concerta con scrittori di molto credito,
non posso nondimeno tralasciarle per la loro necessità e pel
superchio rispetto all’altrui sentenza, sapendo per prova che tutti gli
uomini qualche fiata rimangono in inganno.
«A me dunque, che posi in disamina l’archivio della detta compagnia
anche coll’intendimento di veder meglio questa materia, pare la cosa
assai diversa e massime per due ragioni. La prima è che
nell’archivio suddetto non trovi menzionato alcun luogo
dell’Anfiteatro rivolto all’uno e all’altro uso. La seconda che questi
pareri discendono dalla falsa congiunzione di due idee, tra loro ben
distinte. Nel trovar scritto spedale e monistero del Colisseo
s’intesero due fabbriche non già vicine ma entro quella orrevole
dell’Anfiteatro Flavio. Ora partendo da un principio stabile e certo
dirò che avanti e alquanto dopo il mille come è sconosciuta la chiesa
di S. Giacomo, così al pari il suo spedale di donne, l’edificamento del
quale non sembra più antico di quello di S. Angelo, ma piuttosto da
esso originato, ed a lui assoggettato e dipendente [733]. Per
avventura venne aperto dai Raccomandati per maggior comodo
degli infermi [734], come meno lontana dalla parte più popolata di
Roma, e prova ne sia fra le altre quella, che, ingrandito lo spedale al
Laterano non fu chiuso nè quello, nè l’altro assai più picciolo di S.
Pietro e Marcellino chiamato lo spedaletto, ma tutti e tre correndo gli
anni di Cristo 1383, a benefizio del comune ricettavano malati [735]....
Ma siccome lo spedale.... fu aperto principalmente per donne [736],
che ebbero bisogno nelle loro malattie di essere servite da altre
femmine, queste incominciarono prima a nominarsi offerte, e
costrette da necessità a dimorare e convivere in quel luogo, tennero
vita a seconda di qualche regola; da queste dunque o da altre
povere donne ivi raccolte, o come par meglio, e dalle una e dalle
altre, venne a formarsi una di quelle devote unioni ne’ secoli di
mezzo appellate case sante.